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Honda net up but profits in trouble

Hard to believe...

Off weak sales at home and a strengthening yen, Honda Motor reported a 17-percent drop in operating profit Tuesday and forecast a worse than expected year. Honda also said it was passed by Nissan as Japan's number-two automaker during the last fiscal year. Honda's North American sales softened too as the automaker has not put big incentives on its vehicles as Toyota has done. Too, Hyundai and Kia have been cutting into Honda's small car and small SUV business. A slowdown in North American sales was a worry because the region accounts for four-fifths of operating profit. In the year that ended March 31, operating profit was 600.14 billion yen ($5.52 billion), compared with analysts' average estimate of 630 billion yen ($4.74 billion), as the dollar's fall helped to shave $921 million.

But net profit grew by 8.8 percent to a record $4.23 billion, thanks partly to robust earnings in China, which are not counted at the operating level. Assuming an eight-yen weakening in both the dollar and euro this year, Honda forecast a 6.7-percent fall in operating profit to 560 billion yen ($5.15 billion) for the current business year, far short of analysts' consensus estimate of $5.60 billion. -Jim Burt

http://www.thecarconnection.com/index.asp?article=7085&sid=173&n=156
 

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WanTing is right -- the title is confusing, and so is the whole thing.

I guess what it means is that not everything is "counted," which I've never heard of before for anything (except for Enron-type accounting scams, which I assume this isn't) -- and that the actual overall profits were up, but the stuff that "counts" wasn't.
 

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Weak dollar hits Honda profits; worse year ahead

Reuters / April 27, 2004

TOKYO (Reuters) -- Hit by dismal domestic sales and a weaker dollar, Honda Motor reported a 17 percent drop in operating profit Tuesday and forecast a worse than expected year after being overtaken as Japan's second-ranked carmaker.

A day earlier, rival Nissan Motor Co. posted a 12 percent jump in annual operating profit as it sold more than 3 million vehicles to pass Honda and grab second place among Japanese carmakers in terms of global sales.

Japan's top automaker, Toyota Motor Corp., is also expected to rake in record profits when it reports next month, having attacked every major market with new products amid cutthroat competition.

While Honda expects the launch of high-margin cars such as the remodeled Odyssey minivan to spur sales at home this year, analysts said a slowdown in North American sales was a worry because the region accounts for four-fifths of operating profit.

Currency swings also hurt Toyota and Nissan, but with North America accounting for roughly 60 percent and 70 percent of their profits respectively, according to JP Morgan's estimates, Honda remains the most vulnerable to a softer dollar.

"They face a high hurdle in foreign exchange, which means that on paper their performance does not look as good," said Kurt Sanger, auto analyst at ING.

Sanger said that if Honda expected exchange rates to stay flat this year, it would have forecast a 17 percent rise in operating profit.

Assuming an eight-yen weakening in both the dollar and euro this year, Honda forecast a 6.7 percent fall in operating profit to 560 billion yen ($5.15 billion) for the current business year, far short of analysts' consensus estimate of $5.60 billion.

Unfavorable currency swings would lop off $1.27 billion from earnings, it said.

In the year that ended March 31, operating profit was 600.14 billion yen ($5.52 billion), compared with analysts' average estimate of 630 billion yen ($4.74 billion), as the dollar's fall helped to shave $921 million.

But net profit grew by 8.8 percent to a record $4.23 billion, thanks partly to robust earnings in China, which are not counted at the operating level.

Honda leads most automakers in the red-hot Asian market, where it has expanded successfully on strong brand recognition cultivated through its motorcycle business.

Revenue grew 2.4 percent to a record $74 billion as car sales rose 3.3 percent to 2.983 million units.

MORE LIGHT TRUCKS

After expanding its U.S. market share to 8.1 percent in 2003, Honda is expected to lag its Japanese rivals this year due to a lack of pickups and other light trucks -- a traditional strength of the U.S. Big 3, which Toyota and Nissan have been attacking aggressively.

Honda has responded by planning its own version of a pickup that it calls a sport utility truck, but that will only go into production in 2005. For this business year, it forecast North American sales to rise just 0.4 percent.

Executive Vice President Koichi Amemiya conceded that light trucks such as minivans and SUVs made up a relatively small portion of Honda's U.S. sales. But he added that the ratio would rise with the expansion of its Alabama plant.

"Last year, light trucks made up about 56 percent of the overall U.S. market, but only 39 percent of Honda's products," he said in a news conference. "But this year, we expect a contribution of 41 to 42 percent."

With that, Amemiya said, Honda would aim to lift its operating profit margin in North America to double digits.

Last year, the margin skidded to 6.6 percent from 9.4 percent the year before as Honda booked huge recall and warranty extension costs.

Source
 

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opps, I posted another article on this topic in another thread from Reuters. It goes into more depth. If possible can they merge the threads?:eek:
 

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Don't know if it has anything to do with this, but Honda stock is down about 1.5% today.
But so is Toyota.
And everything overall is down almost that much.
 
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