July 31, 2013 / 8:13 AM / 6 years ago

Honda first-quarter profit lower than expected, cautious on emerging markets

TOKYO (Reuters) - Honda Motor Co (7267.T) announced a lower than expected 5.1 percent rise in quarterly operating profit after sales in Japan dropped following the end of subsidies and as it lagged behind rivals in selling profitable SUVs and pickups in the U.S.

Visitors look at a Honda Motor Co's car displayed outside the company showroom in Tokyo April 26, 2013.REUTERS/Yuya Shino

Japan’s third-biggest automaker saw strong April-June sales in Asia, including its fourth biggest market Thailand, but Executive Vice President Tetsuo Iwamura sounded a note of caution about unexpected swings in emerging markets.

Honda posted an operating profit of 185.0 billion yen ($1.9 billion) for its April-June first quarter, compared with 176.01 billion yen a year earlier.

The result was below the average estimate of 209.3 billion yen in a Thomson Reuters I/B/E/S poll of four analysts.

For its fiscal year ending in March 2014, Honda stuck to its forecast for 780 billion yen, lower than 840.0 billion yen, the mean of estimates by 21 analysts.

Honda, the fifth biggest carmaker in the United States, sold 745,578 vehicles there in the first half of the year, up 6 percent from the same period a year ago, helped by strong sales of the popular Accord sedan.

The United States is Honda’s biggest market, accounting for about 40 percent of Honda’s global vehicle sales. Its market share shrunk 0.1 percentage point during the same period to 9.5 percent.

“Pickups and SUVs are growing in the U.S. market, helping the Detroit-based carmakers... Our light-truck supply was relatively low, but we are introducing a new model,” Iwamura told reporters, referring to the MDX, a SUV by Honda’s luxury brand Acura.

Shares in Honda have soared nearly 60 percent since mid-November, when expectations were growing that Shinzo Abe would take over as prime minister to implement his bold economic policies and help weaken the yen.


Sales in Japan, Honda’s second biggest market, dropped by 24 percent in the first quarter to 140,000 vehicles after government subsidies for green cars ended late last year.

Honda, which has set an aggressive goal to expand global annual sales to 6 million vehicles by March 2017 from the current 4 million, is facing expansion costs as it is building multiple new plants or expanding capacity at existing factories.

Its capital expenditure spending in the first quarter jumped 78.6 percent year-on-year to 171 billion yen.

Honda’s new Yorii plant in Japan has started to operate earlier this month, while its new plant in Mexico is set to start operations in 2014. It is also planning new plants or expansions in multiple countries including Thailand and China.

“At times we see various big unexpected moves in emerging markets so we are cautious. But automobile and motorbike demand will certainly grow there so we will continue to build foundations for success,” Iwamura said.

Honda saw Thai April-June sales jump nearly 30 percent from a year ago to around 59,000 vehicles as it still has some 100,000 orders from before end-2012 when the government still offered subsidies for first-time car buyers.

While sales in Southeast Asia’s biggest car market have been dropping in the recent months and Honda expects some cancellations of the existing orders, Iwamura said the company aims to retain demand by introducing new models.

Japan’s biggest automaker Toyota Motor Corp (7203.T) is set to release its April-June earnings results on Friday. Last week, Japan’s second biggest carmaker Nissan Motor Co (7201.T) booked 108.1 billion yen in quarterly operating profit, up 23 percent from a year ago.

Editing by Jeremy Laurence

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