TOKYO - Honda Motor Co. Ltd. last week announced a double-digit decline in profits for the April-June quarter, after the strong yen battered overseas revenues that it relies heavily on.
Hit by the double blow of the high yen and bleak sales of new cars in the domestic market, Honda's consolidated operating profit stood at ¥125 billion (euro 1.16 billion) for the period, the first quarter of the business year, down 13 percent from a year ago, when its profit jumped 30.4 percent.
The figures are calculated under US accounting rules.
It was the first decline in the automaker's quarterly operating profit since the January-March quarter of 1998 and the first slippage in its first-quarter profit since the 1993/94 fiscal year.
But the fall in the earnings of the nation's third-largest automaker came as no surprise. It was in fact smaller than an earlier estimated drop of around 20 percent and the market had already priced in a downturn.
Few analysts believe Honda will lose its long-term luster.
The earnings announcement came just before the stock market ended. Honda, a darling of foreign investors, ended 11 August's session on the Tokyo stock market down ¥30 at 4,810, down 18 percent from its lifetime peak of 5,880 in April.
Honda had record profits for a third consecutive year in 1998/99, buoyed by robust US sales, but it has warned the yen's rise will trim its income this business year.
A strong yen makes Japanese exporters less price competitive in the global market while reducing their yen-based export incomes.
Honda, using an assumed dollar rate of ¥115, maintained its profit estimates for the full fiscal year to March 2000. Its consolidated operating profit was estimated to fall nearly 20 percent to ¥440 billion, while after-tax net profit was expected to drop by 18 percent to ¥250 billion.
Partly to hedge itself from currency risk, Honda plans to boost its output in North America, where it earns 70 to 80 percent of its group income when exports from Japan are included.