Honda qtrly profit jumps, but below mkt expectations

A strong yen eroded its gains from sales recovery in North America, its biggest market

Honda Motor Co's operating profit rose less than expected in the April-June period to 176 billion yen, as a strong yen eroded some of the gains from its sales recovery in North America, its biggest and most profitable market.

While the result was below the average estimate of 197.4 billion yen by seven analysts polled by Thomson Reuters I/B/E/S, it was nearly eight times the year-ago figure, as the company rebounded after last year's March 11 earthquake and tsunami.

Japan's No.3 automaker on Tuesday also kept its operating profit forecast unchanged for the year ending in March 2013 at 620 billion yen, confident of its recovery despite a global economic outlook clouded by the euro-zone debt crisis and a slowdown in China, the world's biggest auto market.

The maker of Accord sedans and Super Cub motorcycles was hit much harder than rivals Nissan Motor Co and Toyota Motor Corp in the last financial year by natural disasters in Japan and Thailand that disrupted supply chains.

It has set an aggressive global sales target of 4.3 million vehicles in the financial year to March 2013, up 38.4% from the previous year, with North America to account for about 40% of the total.

Toyota, which announces earnings on Friday, is set to raise its 2012 global sales target to 8.8 million vehicles from 8.58 million, Japanese media reported on Tuesday, while auto parts maker Denso Corp boosted its half-year operating profit forecast by 50% to 135 billion yen as the sector's outlook improves.

Honda's market share has recovered to pre-quake levels in its two biggest markets in the United States and Japan, where sales volumes surged in May and June as the company's restored production base finally caught up with pent-up demand.

Whether Honda can achieve its ambitious sales target will depend in part on how its flagship Accord sedan is received in the US market after a revamp this fall with a new generation of engines and transmissions to boost fuel efficiency.

But competition has heated up, especially from a resurgent US industry and emerging South Korean rivals.

"There are too many models in a segment that used to be dominated by Japanese brands," Kunihiko Shiohara, managing director at Credit Suisse in Tokyo, said before the announcement.

Japan's exporters have also got little respite from the steady rise in the yen, which reduces their competitiveness against South Korean automakers and other overseas rivals, and eats into income earned abroad when it is converted into yen.

Shares in Honda have fallen nearly 20% in the financial year that began in April, the biggest drop among the top three Japanese carmakers. Before the earnings announcement on Tuesday, Honda shares ended at 2,551 yen, up 2.1%, versus a 0.7% rise in the benchmark Nikkei 225 average.