U.S. Sales Help Honda Profit Increase 27% [NYT]
By TODD ZAUN
TOKYO, April 26 - Profit at the Honda Motor Company increased 27 percent in the most recent quarter as strong sales of Odyssey minivans and Acura RL luxury sedans in the United States helped offset revenue lost to unfavorable currency swings.
In its earnings report on Tuesday, Honda warned, however, that profit would probably slip in the year ahead, echoing the cautious tone that a rival, Nissan, sounded a day earlier. Japanese carmakers are worried about the rising prices of gasoline and of crucial materials like steel.
Honda, Japan's third-largest carmaker after Toyota Motor and Nissan, posted net profit of 94 billion yen ($887 million) for the three months ended March 31, its fourth fiscal quarter. Revenue rose 9.5 percent from a year earlier, to 2.35 trillion yen ($22.25 billion), as rising sales in the United States, China and Europe more than offset a small decline in sales in Japan.
But along with the strong earnings, the company forecast that its profit would decline 7.4 percent, to 450 billion yen, for the fiscal year ending March 31, 2006, from the year ended last month. In addition to the damping effect of high oil and steel prices on vehicle sales, Honda's senior managing director, Satoshi Aoki, told reporters the company expects increasing competition in the fast-growing Chinese market.
"Profits at our affiliates in Asia, particularly in China, are expected to decrease," Mr. Aoki said on Tuesday. "The business climate is becoming very tough there."
In its latest report, however, Honda was thriving. Sales in the United States grew for the quarter, despite sharply slower sales of its biggest-volume models, the Civic and Accord sedans, as those designs show their age. Honda offset the declines with gains in its Odyssey minivan, the Pilot sport utility vehicle and several new models in its luxury Acura line.
Honda, like Toyota and Nissan, has expanded its lineup of light trucks, a profitable part of the market once clearly dominated by Detroit. Last month, Honda began selling its first pickup, the Ridgeline. But while American automakers say they are seeing customers turn away from their big gas-guzzling S.U.V.'s as gas prices rise, Honda and other Japanese brands are promoting the fuel efficiency of their generally smaller and lighter S.U.V.'s and trucks.
Over all, Honda sold 415,000 cars in North America during the quarter ended in March, 12.5 percent more than in the year-earlier period.
Honda's sales also rose in China and elsewhere in Asia. Honda sold 120,000 vehicles in Asia during the quarter, 17.6 percent more than in the year-earlier period.
Honda's rising sales volumes overseas helped it overcome profit-eroding fluctuations in currencies. Honda said changes in currency rates reduced its operating profit for the fiscal year by 95 billion yen ($899 million). Honda sells more than three-quarters of its vehicles outside Japan, and is therefore vulnerable to currency swings.
The weak spot for Honda last quarter was Japan, where its sales fell 7.1 percent from a year earlier, to 195,000 vehicles. Honda has rolled out several small minivans in Japan over the last year but has struggled to make its vehicles stand out against similar models from Toyota, which dominates the market .
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