Tokyo: Honda Motor Co, Japan’s No.2 automaker, forecast a 10% rise in operating profit this year as demand in its biggest and most profitable US market recovers from a multi-decade low.
Honda, also the world’s top motorcycle maker, is well positioned to gain from a steady rise in US sales with its fleet of fuel-efficient models, which will see the addition of the CR-Z sporty hybrid in North America in a few months.
Overcapacity in Europe as sales sink in the absence of government subsidies remains a drag, but analysts expect strong growth in China and other Asian markets to keep Honda on track to expand its profits and outperform its domestic rivals.
For the year to end-March 2011, the maker of the Civic and Accord models forecast an operating profit of ¥400 billion ($4.3 billion), up from the ¥363.8 billion it made in the year to March 2010. It sees net profit growing 27% to ¥340 billion this year, after a near doubling last year.
Honda, the first big Japanese automaker to report fourth-quarter results, is expected to have booked the biggest profits in 2009-10 among its peers, helped by a lucrative and fast-growing motorcycle business.
Operating profit for the January-March quarter just ended was ¥96.1 billion, compared with a loss of ¥272.1 billion a year earlier, when it cut back production to reduce inventory.
The result was slightly higher than the ¥94 billion average estimate in a poll of 19 brokers according to Thomson Reuters.
Fourth-quarter net profit came to ¥72.2 billion versus a loss of ¥180 billion a year ago.
In the medium term, Honda CEO Takanobu Ito, a 32-year company veteran and former chassis designer, will be under pressure to speed up development of a new, more fuel-efficient hybrid system to power its bigger vehicles to compete with Toyota Motor Corp and a growing number of automakers launching “full” hybrid cars.
Honda’s one-motor hybrid system has the advantage of being simple and cheaper, but lacks the power to be mounted on anything bigger than a CR-V crossover.
Shares in Honda have gained 6.4% in the year to date, outperforming a 1.2% rise in Tokyo’s transport subindex. Before the results, Honda ended down 1.5%, while the sector index fell 1.2%.