Honda profits fall 90%

Honda slashed its annual profit target by more than half today and said profits had tumbled 90% in the latest quarter, hit by rising costs, a stronger yen and falling sales in key markets.

Japan’s second biggest carmaker said net profit for the October-December period was 20.24 billion yen (€174m) compared with 200 billion a year earlier.

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 car makers,” said Credit Suisse analyst Koji Endo.

The maker of the Accord and Civic models cut its profit target for the fiscal year to March by 57%, to 80 billion yen (€697m) from 185 billion yen.

Toyota, the country’s top carmaker, has said it expects its first operating loss in 70 years this fiscal year, and media reports and analysts predict Nissan will also report a loss for the period.

Toyota is due to report third quarter earnings next Friday followed by Nissan later in February.

For the latest quarter, Honda said revenues fell 17%.

Honda said it spent more on raw materials such as steel and had higher sales costs compared with a year earlier. Foreign exchange also took its toll, as the yen has hovered around 13-year lows.

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.

The company has announced job cuts and scaled back production at manufacturing lines worldwide. The measures include halting production at the firm’s UK plant in Swindon for four months from today.

Honda’s results came a day after US rival Ford said it lost 5.9 billion dollars (€4.5bn) in the fourth quarter, leading to the worst annual loss in its 105-year history.

Honda released its earnings after stock trading had finished today. Its shares had plunged 9.2%.