Asia Times: Honda 4th-quarter profit unexpectedly rises 4%



	May 18, 1999	atimes.com

Japan Economy

Honda 4th-quarter profit unexpectedly rises 4%
By Scott Stoddard with reporting from Akira SakuraiBloomberg News

Tokyo - Honda Motor Co., Japan's third-largest automaker, said profit unexpectedly rose in the January-March period as booming U.S. sales compensated for declines inAsia and Europe. But it warned earnings could soon stall because ofa stronger yen.

Honda, maker of the best-selling Accord sedan, reportedgroup current profit, or pretax profit from operations, rose 4.3percent to 102.97 billion yen ($843 million), from 98.7 billionyen the year before. That defied analysts' expectations of a 5.5percent decline to 93.3 billion yen. Sales unexpectedly fell, by2.9 percent to 1.6 trillion yen.

Honda compensated for lower revenue in Japan, Europe andAsia by cranking up sales 4.9 percent in the U.S. and sellinglarger, more profitable cars there such as the Odyssey minivanand Acura TL luxury sedans. Yet current profit will decline 21percent in fiscal 1999 as the yen gets stronger, depleting dollarrevenue, Honda said.

''They need to diversify their profit base so that when theU.S. inevitably weakens, they'll be able to offset that weaknesswith strength in other markets,'' said Steve Usher, an autoanalyst at Jardine Fleming Securities (Asia) Ltd., who has a''hold'' rating on the stock.

Honda depends more than any other Japanese automaker on theU.S. auto market and suffers when the U.S. economy falters or theyen rises. Honda said it expects the dollar to average 115 yen inthe current fiscal year, stronger than the 127 yen it averaged inthe year just ended.

Every one-yen gain against the dollar trims Honda's groupoperating profit by 8 billion yen, as the company converts weakerdollars into yen when bringing home profits, said Jeremy Tonkin,an auto analyst at Towa Securities Co.

''Profit from the U.S. offset a fall in sales of cars andmotorcycles in Asia,'' said Koichi Amemiya, an executive vicepresident of Honda who is also president of the company's U.S.operations.

Sales in Europe fell 6.7 percent to 212.8 billion yen - morethan in Japan, where they fell 2.29 percent to 408.3 billion yen.Overall, overseas sales fell 2.4 percent to 1.20 trillion yen.

Honda offset the decline by selling more and larger cars inthe U.S. The company makes as much as $4,000 for every Acura TLand Odyssey it sells, compared with $1,000 to $2,000 on theAccord, Peter Boardman, an auto analyst at Warburg DillonRead in Tokyo, said in February.

Last week, Honda showed its confidence in the U.S. byannouncing construction of a $400 million minivan and sport-utility vehicle factory in Alabama.

In Japan Honda boosted sales of less profitable mini-vehicles such as the Life, which sells for about $8,000 comparedwith $18,000 for the Accord. That helped it take market sharefrom Nissan Motor Co. and Mitsubishi Motors Corp.

For the year, Honda posted a 17.4 percent jump in groupcurrent profit to 520.5 billion yen, from 43.3 billion yen, onsales of 6.23 trillion yen, up 3.9 percent from 5.99 trillionyen. Its profit for the year beat Honda's most recent forecast,in November, by 4.1 percent.

Group earnings include profit of the parent company,subsidiaries in which the parent's equity is half or more andmost affiliated companies in which the parent has between 20percent and 50 percent of the equity.

The earnings came outafter the market closed. Honda stock has risen 43 percent thisyear, a bigger increase than the 28 percent gain in the Topixtransportation index, comprised mostly of auto and auto partscompanies.

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©1999 Asia Times Online Co., Ltd.