Honda's quarterly profit plunges on disaster

August 1, 2011 - 6:43 AM
Japan Earns Honda

People walk by Honda models on display at Honda Motor Co. head office in Tokyo, Monday, Aug. 1, 2011. Honda's quarterly profit plunged nearly 90 percent after the quake in northeastern Japan disrupted production and sales, but the automaker raised full-year forecasts as its confidence in a recovery mounts. (AP Photo/Junji Kurokawa)

TOKYO (AP) — Honda's quarterly profit plunged nearly 90 percent after the quake in northeastern Japan hammered production and sales, but the automaker raised full-year forecasts as its confidence in a recovery mounts.

Honda Motor Co. said Monday its April-June profit tumbled to 31.7 billion yen ($406 million) from 272.4 billion yen a year earlier. Japan's No. 3 automaker said it managed to remain in the black thanks to its growing motorcycle business.

Tokyo-based Honda, which makes the Odyssey minivan and Fit subcompact, now expects a 230 billion yen ($2.9 billion) profit for the fiscal year ending March 2012.

That is less than half of Honda's 534 billion yen profit in the previous fiscal year, but is better than the 195 billion yen ($2.5 billion) it forecast in June.

Honda also raised its annual sales projection to 8.7 trillion yen ($112 billion), down 3 percent from the previous year, but better than the 8.3 trillion yen ($106 billion) it expected in June.

The manufacturer expects to sell 3.435 million vehicles worldwide, some 135,000 more than it had given as its forecast in June. It sold 3.512 million vehicles the previous fiscal year.

Honda's motorcycle business is booming, and the automaker expects to sell 12.7 million motorcycles for the fiscal year through March 2012, up from 11.45 million the previous year. That's also better than its earlier forecast to sell 12.645 million motorcycles this fiscal year.

Production at all of Japan's automakers was disrupted after parts suppliers were damaged in northeastern Japan by the March 11 earthquake and tsunami.

Honda's quarterly sales dropped 27 percent to 1.7 trillion yen ($22 billion).

Weighing on the bottom line of Japanese automakers is the strong yen, which erodes the value of overseas earnings.

Honda is counting on the dollar trading at 80 yen for this fiscal year, but the greenback has slid to below 80 yen in recent weeks. An unfavorable exchange rate erased 22.5 billion yen ($288 million) from Honda's operating profit in the latest quarter.

But Honda and others are saying that recovery from the disasters is coming quicker than expected, and production levels are projected to return to normal later this year. Strong growth momentum from markets such as China, Southeast Asia and India is also helping.

Mitsubishi Motors, which also released results Monday, said it sprang back into the black for the first quarter as growth in emerging markets offset quake damage. It posted a 4.3 billion yen ($55 million) profit for the April-June period compared with a loss of 11.8 billion yen a year earlier.

The Tokyo-based manufacturer of the i-MiEV electric car left its annual forecast unchanged at a 20 billion yen ($256 million) profit, pointing to uncertainties in the global economy.

Last week, Nissan Motor Co., Japan's No. 2 automaker, reported a smaller-than-expected 20 percent drop in quarterly profit at 85 billion yen ($1 billion). Chief Executive Carlos Ghosn said the result showed Nissan's resilience despite the odds.

Nissan, based in Yokohama, stuck to its forecast for annual profit to fall 15.4 percent to 270 billion yen ($3.5 billion) in the fiscal year ending March 2012. But it is expecting vehicle sales to rise 9.9 percent to 4.6 million vehicles, a record for Nissan.

Mazda reported its third straight quarter of red ink, suffering a 25.5 billion yen ($327 million) loss, but expects to return to the black in the fiscal year ending March 2012.

The maker of the Miata and RX-8 sportscars expects to sell more vehicles than the previous year at 1.3 million vehicles, up 2.6 percent on year, with much of the momentum coming from China.

Toyota Motor Corp., the world's biggest automaker, reports earnings Tuesday.

A possible electricity shortage is another concern for Japanese automakers, but they appear to be keeping that under control by taking Thursday and Friday off and cranking up their assembly lines on weekends.

Japanese companies are trying to reduce electricity consumption by 15 percent after the March disaster sent several reactors at Fukushima Dai-ichi nuclear plant into meltdown. Another plant in central Japan has also been temporarily shut down because of quake concerns.

Honda stock rose 1.5 percent to 3,125 yen, while Mitsubishi Motors gained nearly 2 percent to 103 yen. Both companies' earnings were announced after trading ended in Tokyo.