TOKYO -- Honda Motor Co. reported a surprise rise in quarterly operating profit on Friday, citing firm sales and cost cuts, and it stuck to its original forecast for the full year despite a damaging slide in the dollar.
Japan's second-biggest auto maker had been expected to post a drop in October-December operating profit, hurt by a persistent sales slide at home and slower demand in its crucial U.S. market.
Instead, operating profit rose 1.4 percent from a year ago to 161.13 billion yen ($1.52 billion), much better than a consensus forecast of 145.9 billion yen, as earnings from North America jumped 17 percent.
"(The results were) better than expected," said HSBC Securities analyst Christopher Richter. "We were expecting operating profit to be down, so this is positive news for Honda."
Net profit surged 31 percent to 151.05 billion yen, as expected, lifted by non-operating profits from financial activities and income from its Chinese joint ventures. Sales inched up 0.2 percent to 1.99 trillion yen.
While acknowledging that the weak dollar would take a bigger-than-expected bite out of its revenue, the maker of Accord cars kept its full-year operating profit forecast unchanged at 623 billion yen, citing the removal of expenses for its financial business from the operating level.
It lifted its net profit forecast by a fraction to 473 billion yen, up 11 percent from the year before.
Given the dollar's recent slide to 106 yen, Honda lowered its assumed transaction rate by one yen for the year to 114 yen.
The results came a day after rivals Mazda Motor Corp. and Nissan Motor Co. reported solid quarterly revenues, which probably kept them on track for rosy full-year earnings.
VOLUME FORECASTS CUT
Analysts said the weak dollar and a sales slide in the United States, where Honda makes most of its money, remained a problem.
Honda lowered its full-year sales forecast for North America by one percent to 1.55 million units.
"Sales in Canada are expected to be slightly weaker and demand for the Civic has fallen a bit in the United States, hit by the heavy consumer incentives being offered in the industry," Executive Vice President Koichi Amemiya told a news conference.
Analysts said Honda's U.S. sales would probably fall from last year's high levels for the time being, since few new models are expected before the second half of next business year.
Honda also lowered its domestic sales forecast for the third straight quarter, to 735,000 units for the year from the original 855,000 units projected last April, saying demand for the Fit subcompact had undershot expectations.
That cut its global sales target by 55,000 to 2.98 million units, which would still be up 3.2 percent from last year.
Analysts noted, however, that Honda's domestic sales and model mix would probably start to recover soon thanks to the launch of new cars such as the remodeled Odyssey minivan.
"Valuation-wise, Honda is the cheapest-looking among Japan's auto makers now, but it still has the highest currency exposure and for that reason I don't hold it," said Akihide Kinugawa, fund manager at T&D Asset Management.