Honda First Quarter Results Strong, Eyes Higher Profit for Year
Honda Motor Co. moved up its forecast for profit for the full year citing favorable exchange rates for currency, after posting a rise in its quarterly earnings thanks to a weaker yen and strong demand across Asia.
The third largest automaker in Japan continues struggling in North America its largest overall market, that represents one third of its auto sales, where the sedan, including top sellers at Honda the Accord and Civic, are no longer as popular as drivers shift to larger models such as SUVs.
The situation has been made worse by an overall decline in demand across the auto market in the U.S, which is the second largest in the world trailing just China, following a number of growth years that increased profits following the worldwide financial crisis.
Honda’s North America sales were down 7.6% during its first quarter that ended in June, but that was offset by an increase of 10.8% in sales across Asia, including in China, where the automaker believes will be its top market starting this year.
Civic sedans and the XR-V SUV compact model were China’s top seller for Honda. China represented close to 65% of all sales in Asia for the automaker.
Honda’s operating profit during the quarter moved up 0.9% ending at 269 billion yen against an estimate by analysts of 230.4 billion yen.
For it year through March 2018 , Honda is expecting operating profit to reach 725 billion yen or $6.57 billion, compared to its forecast previously of 705 billion yen, based on a weaker yen that was previously expected.
A weaker yen makes exports out of Japan cheaper and increases the value of proceeds from overseas when converted back to yen.
The automaker is expecting weakness to remain in the auto market across North America and kept its 2.5% drop in annual sales forecast in place for the region.
Honda’s sedans have not been selling in North America like in the past and the automaker has been increasing its SUV production to maintain the shift in SUV demand along with other larger vehicles.
Honda’s ratio of sales of light trucks to passenger cars during the first six months of 2017 were 51% to 49%. While that tilted toward the light trucks from last year, it still is behind industry average for sales of close 62%.
Honda’s North America operating profit was down from 40.6% during the first quarter largely because of higher incentives to clear out inventory of its older Accords.