Honda Q1 Profits Soar 300 Per Cent

The increase prompted the automaker to raise its profit forecasts for the current business year.

Honda's group net profit in the first quarter of the business year that started on April 1 jumped 283.4 per cent from a year before to Y45.71 billion ($423 million).

The main reason for the profit increase was strong demand for recreational vehicles, Honda Motor managing director Kunihiro Chujo said.

He also said group profits in the first quarter were pushed up by Y25 billion ($231 million) due to the weaker yen, which averaged 107 yen to the dollar compared with 84.45 yen to the dollar a year earlier.

 

Booming sales of recreational vehicles boosted operating profits by Y50.6 billion ($468 million), the company said.

But Chujo said the robust sales also increased sales costs by Y37.1 billion ($343 million) in the quarter.

Honda sold almost three times the number of CR-V recreational vehicles in Japan - 26,492 - it had targeted.

Other recreational vehicles, such Step Wagons and Odysseys, exceeded their sales targets by 100 to almost 200 per cent.

Encouraged by the quarterly result, Honda raised its parent and group profit forecasts for the 1996/97 business year.

It raised its forecast for group net profit to Y160 billion ($1.48 billion) from its May forecast of Y120 billion ($1.11 billion).

In 1995/96, Honda posted actual parent current profit of Y47.18 billion ($436 million) and group net profit of Y70.8 billion ($655 million).

Honda also announced that domestic production in July was up 18.5 per cent from the same month a year ago while domestic sales were up 22.5 per cent.

It said in a statement said that its exports in July rose 14.7 per cent year-on-year, and its overseas production was up 30.1 per cent.

Its production is exceeding projected levels, its US sales are strong now and it will start exporting its CR-V to the US.

That will contribute to its profit in the second half, Nomura Research analyst Seiji Sugiura said.

Domestic demand for Honda cars has been so strong that I believe group profits could be larger than the already revised-up figure of Y160 billion ($1.48 billion) this year, Sugiura said.

Honda will start selling CR-Vs in the US early next year and will resume exporting four-door Civics there later this year, another Honda official said.

He said the Civic exports are needed because Honda's Ohio plant is operating at full capacity and cannot meet demand.

Honda's sales in North America rose 14.6 per cent from a year earlier in the January-July period due to strong demand for almost all its models, including US-made Civics and the Japan-produced Acura TL luxury car.

Overall North American automobile demand rose 3.9 per cent to 8.41 million units in the same period.