Honda H1 net profit up 19%, but cuts annual outlook

TOKYO: Honda on Tuesday said its six-month net profit jumped almost 19%, but the Japanese automaker, dented by a series of recalls, cut its earnings outlook for the full fiscal year.

The Civic and Accord maker posted a 288.41 billion yen (US$2.67bil) net profit in April-September, up from 242.87 billion a year earlier, while sales rose to 6.0 trillion yen from 5.72 trillion yen.

However, Japan's No 3 automaker net profit in the year to the end of March was estimated at 565.0 billion yen, down from an earlier 600 billion yen forecast, owing to a downturn at home and in other key Asian markets, including China.

The company also trimmed its full-year sales forecast to 12.75 trillion yen, from 12.8 trillion yen previously.

"Reflecting ... the forecast decline in unit sales in Japan and China due to the difficult business environment, Honda made some revisions to the previously announced forecasts for the current fiscal year," it said in a statement.

Japanese sales have been dented by recalls of Honda's new Fit subcompact.

The latest recall, of about 426,000 Fits and other vehicles in Japan, prompted Honda's top executives to take three-month pay cuts to atone for the problems.

But Honda credited rising revenue in the first half to "brisk sales of vehicles and motorcycles in addition to positive impacts from currency rates".

The statement added: "The operating profit rose 1.7% year on year after cost-cutting efforts despite higher expenses for sales, general management and research and development."

The Japanese auto industry has benefited from the big-spending policies of Prime Minister Shinzo Abe, with huge monetary easing measures from the premier's hand-picked team at the Bank of Japan helping push down the yen since last year.

A weaker yen boosts the competitiveness of Japanese exporters and inflates their repatriated overseas profits, although the effect has been waning in recent months, analysts say.

"The lower yen is undoubtedly a tailwind but factors other than that have not improved significantly from the first quarter," said Credit Suisse analyst Masahiro Akita.

"A recovery in domestic sales since the April tax rise has been slow...(and) it is also unclear how demand in China – a core market for Japanese automakers - will fare" in the coming months, he added.

Japan raised its sales tax in April for the first time in 17 years in a bid to help pay down an eye-watering national debt.

But the levy hike hit growth in the world's number three economy as consumer spending dropped off once prices went up on April 1. That hurt demand for big-ticket items, including vehicles.

Honda is the first of Japan's "Big Three" automakers to post its latest earnings, with rival Toyota and Nissan both reporting next week. – AFP