- Title: JAPAN: Japanese automakers Honda and Nissan cling to profit
- Date: 30th July 2009
- Summary: TOKYO, JAPAN (JULY 29, 2009) (REUTERS) HONDA MOTOR EXECUTIVES WALKING INTO NEWS CONFERENCE HONDA LOGO THREE HONDA OFFICIALS AT THE CONFERENCE (SOUNDBITE) (Japanese) KOICHI KONDO, EXECUTIVE VICE PRESIDENT OF HONDA MOTOR CO., SAYING: "We posted a profit of 25.1 billion yen (266.3 million U.S. dollars), down 88% from the previous year, after seeing production cost pushed up by reduced production levels and a higher (yen-dollar) exchange rate." NEWS CONFERENCE (SOUNDBITE) (Japanese) KOICHI KONDO, EXECUTIVE VICE PRESIDENT OF HONDA MOTOR CO., SAYING: "For us to post a bigger profit, it is essential to see a recovery of the North American market."
- Embargoed: 14th August 2009 13:00
- Location: Japan
- Country: Japan
- Topics: Industry
- Reuters ID: LVA7ZTFDSBOSMBQVAVX94H0F7DDO
- Story Text: Honda Motor, Japan's No.2 automaker, on Wednesday (July 29) lifted its annual forecasts after posting a surprise first-quarter profit, but the boost came from cost reductions and executives remained downbeat on global vehicle demand.
Like most Japanese automakers, Honda is expected to see its earnings gradually improve as production volumes return from the low levels since late last year when sales plunged after the collapse of U.S. bank Lehman Brothers squeezed the auto loans market and led to job losses.
Still, most auto executives have yet to call a convincing recovery in demand and are trying to battle a sales decline with cost-cutting as much of the demand in developed markets is being supported by government schemes to encourage consumption.
"We posted a profit of 25.1 billion yen ($266.3 million U.S. dollars), down 88% from the previous year, after seeing production cost pushed up by reduced production levels and a higher (yen-dollar) exchange rate," Honda Executive Vice President Koichi Kondo told a news conference, adding that sales were weaker than expected in its key U.S. market.
"For us to post a bigger profit, it is essential to see a recovery of the North American market," Kondo said.
Honda, also the world's top motorcycle maker, posted an 88 percent fall in operating profit to 25.2 billion yen ($267 million U.S. dollars) in the April-June quarter, beating a consensus estimate for a 106 billion yen loss in a survey of four analysts polled by Thomson Reuters.
It made a net 7.6 billion yen in profit in the first quarter compared with a profit of 173.4 billion yen a year ago.
For the financial year to March 31, 2010, Honda expects an operating profit of 70 billion yen and net profit of 55 billion yen. Three months ago, it had forecast the profits at 10 billion yen and 40 billion yen.
The revision came despite Honda's assumption for a stronger yen against the dollar, at an average 91 yen for the financial year instead of 95 yen. It expects a stronger euro of 127 yen versus the previous 125 yen assumption.
Kondo said Honda now expects better car sales in Japan and China, but worse in the United States and Europe. Overall, it lifted its global sales forecast by about 80,000 cars to 3.295 million for the year to March 2010.
While Honda has fared better than many rivals in Japan and China this year, as government incentives helped sales of its smaller, fuel-efficient vehicles, investors are keen to see signs of a recovery in the United States and Europe, where its sales lag the market with sharp double-digit falls.
Meanwhile, Honda's rival Nissan Motor on Wednesday posted an 86 percent fall in quarterly operating profit, hit by a stronger yen and declining sales, but avoided the loss analysts had expected by cutting costs aggressively.
Predicting no convincing recovery in global car demand, Japan's No.3 automaker kept its forecasts for an annual loss unchanged as a lack of hybrid cars overshadowed solid sales in China.
Chief Executive Carlos Ghosn has previously said Nissan will focus on returning to positive free cash flow through joint cost-cutting efforts with French partner Renault.
While some bright signs are emerging on the sales front -- Nissan has enjoyed stellar growth in China this year thanks to a line-up heavy in smaller cars that enjoy tax incentives -- its lack of hybrid models has left it trailing the market in Japan.
For the first time, Nissan, Japan's No.3 automaker, sold more vehicles in China than at home in the first half of the year.
"We believe it would be premature to lift forecasts at this juncture," Nissan Chief Operating Officer Toshiyuki Shiga said, listing among the risks a further rise in the yen and drops to global car sales when government steps to stimulate demand come to an end.
Nissan made an operating profit of 11.6 billion yen ($122.9 million U.S. dollars) in April-June, down from a profit of 80 billion yen (848.8 million U.S. dollars) a year earlier, but beating a consensus loss estimate of 117 billion ($1.24 billion U.S. dollars) yen in a poll of four analysts by Thomson Reuters.
Nissan, held 44 percent by France's Renault, lost a net 16.5 billion yen ($175 million U.S. dollars) in the first quarter, against a profit of 52.8 billion yen (560 million U.S. dollars) a year ago.
As Honda and top ranked Toyota Motor aim to spur car sales with new hybrid vehicles, Nissan is pouring its efforts into creating a market for pure electric vehicles with the first launches in Japan and the United States next year.
"Electric cars will soon make a new history of the auto industry, just as our soon-to-be-launched new headquarters will make a new history for Nissan," Shiga said.
Partly on hopes for its lead in electric vehicles, shares in Nissan have almost doubled in price this year, making them the best performer among Japanese auto shares. Tokyo's transport sub-index gained 44 percent in the same period.
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