Honda Profits Soared in During Second Quarter

Honda Motor Company’s profits soared during the second quarter as sales in North America rebounded. During the April through June period, the automaker restored its production network which was disrupted by the March 11, 2011 Japan earthquake and subsequent flooding in Thailand.

Industry data now shows that Honda’s U.S. market share has rebounded to pre-quake levels and the company has now reaffirmed its full-year global sales, and earnings outlooks.

Honda’s quarterly results are seen by some as further evidence of the Japanese auto industry’s recovery.  The world’s largest automaker, Toyota Motor Corporation, recently regained the title of “world’s largest automaker” and will reportedly raise its full-year global sales forecast. Japanese auto parts maker Denso Corporation has also raised its full-year operating profit forecast by double digits.  But not all analysts are as optimistic about Honda’s fortunes.

CLSA Asia-Pacific Markets analyst Christopher Richter said, “They’ve had some huge growth and decent margins but at the same time below what analysts have been expecting.”  However, Honda’s Chief Financial Officer Fumihiko Ike said, “While there are various risk factors such as economic conditions and currency moves, as well as a uncertainty over demand, Honda will maintain its forecast.” He added, “We think that our (April-June) operating profit of 176 billion yen ($2.25 billion) is basically on track when we compare it with our guideline of 620 billion yen for the financial year.”

Honda expects to sell 4.3 million vehicles worldwide during the financial year which ends in March 2013, up 38.4 percent year-to-year. The North American market is expected to account for approximately 40 percent of those sales.

Honda is betting heavily on the success of its revamped flagship model, the Honda Accord sedan, to help it attain its ambitious sales goal. The 2013 Accord will be more fuel efficient than the current-year model, in part due to a new engine and transmission.

Some, including Credit Suisse managing director Kunihiko Shiohara, feel that increased competition in the segment could result in lower sales for Honda. “There are too many models in a segment that used to be dominated by Japanese brands,” said Shiohara.

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