* Honda Q3 net profit 77.4 bln yen, up from 47.7 bln
* Sales in China, Europe poorer than expected -exec
* Yen drop yet to have large positive impact
* FY 2013/14 seen strong, helped by sales of new cars
(Recasts, adds executives' comments, unrealised FX loss,
delisting from London Stock Exchange, shares)
By Yoko Kubota
TOKYO, Jan 31 Honda Motor Co Ltd is
betting on a weaker yen and a rollout of new models in the
United States to boost car sales after unexpectedly trimming its
annual net profit forecast on poorer-than-expected demand in
China and Europe.
Honda said the outlook for China remained murky after
Japanese brands saw sales plunge in the world's second biggest
economy late last year when anti-Japan sentiment flared. The
euro zone's grinding debt crisis also crimped car purchases.
"We can't quite tell if it will go back 100 percent to the
levels prior to the issues," Chief Financial Officer Fumihiko
Ike told Reuters on Thursday, referring to China.
Analysts had expected the yen's steep depreciation since
December to at least partially offset the slower sales in China
Honda, Japan's third-biggest automaker by sales volume, made
net profit of 77.4 billion yen ($849.9 million), up 63 percent
from a year earlier, undershooting the average estimate of 111.4
billion yen among seven analysts polled by Thomson Reuters
For the financial year ending March, Honda cut its global
car sales forecast to 4.06 million vehicles from 4.12 million,
and its European car sales outlook to 185,000 vehicles from
Honda's weaker-than-expected results highlight the risk that
the shifting value of the yen may take more time than
anticipated to feed into exporters' bottom lines.
"The market had expected the company to release a bright
outlook on the back of a weakening yen," said Yoshihiro Okumura,
an analyst at Chibagin Asset Management.
"It was negative that the company did not raise its
full-year outlook. Now, investors will be watching how the
carmaker will try to raise sales in the core U.S. market this
Honda, which relies on the United States for 40 percent of
its global sales, maintained its North American sales forecast
for the year to March. It launched the fully redesigned Accord
sedan in the U.S. in September, and gave the Civic compact car a
minor upgrade for its December relaunch.
For rivals Toyota Motor Corp and Nissan Motor Co
Ltd, the U.S. accounts for about a quarter of global
Honda is the first among major Japanese automakers to
announce its third-quarter earnings. Toyota is set to announce
on Feb. 5, and Nissan on Feb. 8.
Japanese carmakers have suffered lower sales in China, the
world's biggest auto market, since September as a result of a
territorial dispute between the countries, which brought many
Chinese onto the streets to protest against Japan.
In China, which accounts for about 15 percent of Honda's
global sales, the automaker shifted about 604,000 vehicles in
2012, down about 3 percent from a year ago in a market that grew
"The drop in car sales volume was a bigger negative factor
than foreign exchange," Chief Financial Officer Ike told
reporters, referring to how Honda can convert overseas profits
back to the yen at a more favourable rate with the yen's recent
"But when it comes to the next business year, we will start
to see the full effects of the new models that have been
introduced. Our full abilities are not reflected at the moment,"
While many Japanese exporters have expressed confidence that
a weakening yen will improve profitability, Honda booked what it
said was an unrealised loss on currency derivatives of 54.5
billion yen for the three months ended December as a result of
the steep fall in the yen.
The yen lost about 10 percent against the dollar from
the beginning of October to the end of December. It now trades
around 91 to the dollar, down from 78 at the start of the
In the current quarter and the next business year, Honda
expects the currency moves to prove a boon, as it will be able
to convert overseas profits back into yen at a more favourable
rate, and export cars more cheaply.
Honda's operating profit will rise by about 16 billion yen
for every one-yen hike in the value of the dollar, Ike said.
Honda changed its average dollar rate assumption to 81 yen
from 80 yen for the financial year that ends in March. For the
fourth quarter, its dollar rate assumption is 85 yen, executives
"Since the yen is trading at around 90 yen at the moment, it
may be the case that 85 yen is conservative. But the currency
moves at the end of 2012 were very sudden, and we do not know
what will happen in February and March," Ike said.
Helped by the softening yen, Honda shares have risen about
50 percent since mid-November, while Nissan is up 37 percent and
Toyota about 43 percent. Honda closed at 3,505 yen on Thursday
prior to the earnings announcement.
The firm also said it will delist from the London Stock
Exchange at the end of March because the volume of trade is
($1 = 91.0650 Japanese yen)
(Additional reporting by Dominic Lau, Ayai Tomisawa and Tomo
Uetake; Editing by Daniel Magnowski)