Honda on Friday lowered its profit forecast for the fourth time this year, foreshadowing what is expected to be a dismal earnings season for Japanese automakers as the strong yen further reduces demand for cars.
Toyota shares fell 4 percent on Friday on a report in The Nikkei, a respected business daily, that Japan’s largest carmaker’s operating loss may reach 400 billion yen, or $4.5 billion, for the business year ending March 31, far exceeding the 150 billion yen loss Toyota projected last month.
Honda, Japan’s second largest auto manufacturer after Toyota, said it now expected a net profit of 80 billion yen for the year ending March 31, rather than the 185 billion yen it had forecast as recently as December. Operating profits are now seen totaling 140 billion yen, rather than 180 billion yen. For the third quarter of the business year—October-December—Honda reported a 90 percent plunge in net profits to 20.2 billion, well below the 32 billion that analysts had expected. Honda shares fell 9.2 percent Friday.
Honda’s earnings numbers, while grim, still beat expectations and showed that the firm may be faring better than its Japanese rivals in the downturn. Analysts surveyed by Thomson Financial had forecast an average 19.75 billion yen quarterly profit.
“The results were a lot better than expected. Honda is doing well, relative to the other Japanese carmakers,” said Credit Suisse analyst Koji Endo.
For the latest quarter, Honda said revenues fell 17 percent, to 2.53 trillion yen from 3.04 trillion yen.
Honda said it spent more on raw materials such as steel and had higher sales costs compared to a year earlier. Foreign exchange also took its toll, as the yen has hovered around 13-year lows near 90 yen, compared to levels above 110 yen the previous year.
The company said it sold fewer vehicles in Japan, North America, and Europe during the quarter, but reported strong growth in Asian countries.
This follows Honda’s announcement last week that its global production in 2008 rose to a record high, with booming demand in China offsetting sluggish sales in the United States and Europe.
Despite the stronger sales in Asia, Honda has still had to move quickly to lower expenses and adjust production as the global recession sets in.
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