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TOKYO (Reuters) - Honda Motor Co, Japan's second-largest automaker, revved to record profit in the year that ended on March 31 and aggressively forecast even higher income for this business year.
Driven by a weaker yen and healthy sales, consolidated operating profit for the maker of Odyssey minivans and Accord sedans soared to 639.3 billion yen ($4.97 billion), a 57 percent jump over the previous year.
The result was in line with an average of nine brokerages' estimates of 635 billion yen, but it was the company's profit outlook for the new year that surprised and pleased analysts.
Consolidated operating profit was seen rising another 12.6 percent to 720 billion yen, with sales climbing 10 percent to 8.1 trillion yen after rising 14 percent to 7.36 trillion yen in the past business year.
Net profit was forecast to rise 27 percent to 460 billion yen in the year that began on April 1.
That comes after a 56 percent increase in the past business year to a record 362.7 billion yen, the equivalent of 372.23 yen earnings per share compared with 238.34 yen a year earlier.
"Honda is now showing what it's capable of. After years of being told it was too small to survive, it is proving that it is not size that matters," said Takaki Nakanishi, auto analyst at Merrill Lynch Securities.
"Honda's work in improving its manufacturing flexibility, cost control and its ability to bring the right product to the market at the right time is paying off," he said.
The aggressiveness of Honda's estimates for the current business year was underscored by its relatively conservative assumption of an exchange rate of 125 yen to the dollar, the same as it used last business year.
Softness in the Japanese currency, which inflates the yen value of income earned abroad and makes exports more profitable, contributed 230 billion yen in the past business year but was only forecast to contribute 2.3 billion yen this year.
CAR SALES LOOKING GOOD
Honda also predicted a 7.3 percent rise in global vehicle sales to 2.86 million units, including an 8.9 percent rise for North America, a 4.8 percent rise for Japan and an 8.0 percent rise for Europe.
"We are going to be launching new models derived from our Fit subcompact and we have revised upwards our 2002 forecast for the U.S. market to 16 million units from 15.5 million, so there will be extra sales there," Honda Executive Vice President Koichi Amemiya told a news conference.
The bullish outlook is likely to go a long way in allaying some market fears that after a strong 2001/02 Honda was nearing a peak in its product cycle, especially for the domestic market.
With a string of minivans including its hot-selling 1.3-liter Fit, known as the Jazz in Europe, Honda has trampled the competition in its home market, where it once trailed far behind Toyota Motor Corp and Nissan Motor Co
Except for a dip in December last year, its domestic sales have risen in year-on-year terms each month since November 1999.
In the U.S., the company's new Alabama plant will come fully on line, and new products like the Pilot sports utility are expected to do well. European operations, however, remain a sore point, although its losses here narrowed by 20 billion yen to 35.3 billion yen and the company said it aims to return to profit in the next business year beginning April 2003.
Honda, also the world's largest motorcycle manufacturer, added that it expected unit sales at its motorbike division to leap 29 percent to 7.88 million units on increased sales in Indonesia, India, Vietnam and Thailand.
SHARE RUN-UP SEEN
In a move sure to please shareholders, Honda also announced it planned to buy back up to 100 billion yen worth of its own shares or up to 20 million shares, equivalent to up to two percent of its outstanding stock.
It also increased its dividend to 28 yen from 23 yen and forecast a 32 yen dividend for this business year.
Prior to the earnings announcement, Honda's shares closed up 1.93 percent at 5,580 yen, compared with a 0.92 percent fall in the benchmark Nikkei average
The company's bullishness combined with the share buy-back would had most analysts predicting a strong run-up in the blue-chip stock.
Stephen Usher at J.P. Morgan said he saw the stock rising above 6,000 yen in the short term while Nakanishi at Merrill Lynch predicted it could go as high as 7,000 yen within a month.
Some fund managers at least said they were still on the cautious side.
"We are not planning to aggressively buy Honda as we are skeptical about the sustainability of its growth momentum," said Yoshihisa Okamoto, senior vice president at Fuji Investment Management Co.
"Competition with the U.S. 'Big Three' automakers, especially in sport utility vehicles, will intensify and could possibly develop into a political issue," he said.
Driven by a weaker yen and healthy sales, consolidated operating profit for the maker of Odyssey minivans and Accord sedans soared to 639.3 billion yen ($4.97 billion), a 57 percent jump over the previous year.
The result was in line with an average of nine brokerages' estimates of 635 billion yen, but it was the company's profit outlook for the new year that surprised and pleased analysts.
Consolidated operating profit was seen rising another 12.6 percent to 720 billion yen, with sales climbing 10 percent to 8.1 trillion yen after rising 14 percent to 7.36 trillion yen in the past business year.
Net profit was forecast to rise 27 percent to 460 billion yen in the year that began on April 1.
That comes after a 56 percent increase in the past business year to a record 362.7 billion yen, the equivalent of 372.23 yen earnings per share compared with 238.34 yen a year earlier.
"Honda is now showing what it's capable of. After years of being told it was too small to survive, it is proving that it is not size that matters," said Takaki Nakanishi, auto analyst at Merrill Lynch Securities.
"Honda's work in improving its manufacturing flexibility, cost control and its ability to bring the right product to the market at the right time is paying off," he said.
The aggressiveness of Honda's estimates for the current business year was underscored by its relatively conservative assumption of an exchange rate of 125 yen to the dollar, the same as it used last business year.
Softness in the Japanese currency, which inflates the yen value of income earned abroad and makes exports more profitable, contributed 230 billion yen in the past business year but was only forecast to contribute 2.3 billion yen this year.
CAR SALES LOOKING GOOD
Honda also predicted a 7.3 percent rise in global vehicle sales to 2.86 million units, including an 8.9 percent rise for North America, a 4.8 percent rise for Japan and an 8.0 percent rise for Europe.
"We are going to be launching new models derived from our Fit subcompact and we have revised upwards our 2002 forecast for the U.S. market to 16 million units from 15.5 million, so there will be extra sales there," Honda Executive Vice President Koichi Amemiya told a news conference.
The bullish outlook is likely to go a long way in allaying some market fears that after a strong 2001/02 Honda was nearing a peak in its product cycle, especially for the domestic market.
With a string of minivans including its hot-selling 1.3-liter Fit, known as the Jazz in Europe, Honda has trampled the competition in its home market, where it once trailed far behind Toyota Motor Corp and Nissan Motor Co
Except for a dip in December last year, its domestic sales have risen in year-on-year terms each month since November 1999.
In the U.S., the company's new Alabama plant will come fully on line, and new products like the Pilot sports utility are expected to do well. European operations, however, remain a sore point, although its losses here narrowed by 20 billion yen to 35.3 billion yen and the company said it aims to return to profit in the next business year beginning April 2003.
Honda, also the world's largest motorcycle manufacturer, added that it expected unit sales at its motorbike division to leap 29 percent to 7.88 million units on increased sales in Indonesia, India, Vietnam and Thailand.
SHARE RUN-UP SEEN
In a move sure to please shareholders, Honda also announced it planned to buy back up to 100 billion yen worth of its own shares or up to 20 million shares, equivalent to up to two percent of its outstanding stock.
It also increased its dividend to 28 yen from 23 yen and forecast a 32 yen dividend for this business year.
Prior to the earnings announcement, Honda's shares closed up 1.93 percent at 5,580 yen, compared with a 0.92 percent fall in the benchmark Nikkei average
The company's bullishness combined with the share buy-back would had most analysts predicting a strong run-up in the blue-chip stock.
Stephen Usher at J.P. Morgan said he saw the stock rising above 6,000 yen in the short term while Nakanishi at Merrill Lynch predicted it could go as high as 7,000 yen within a month.
Some fund managers at least said they were still on the cautious side.
"We are not planning to aggressively buy Honda as we are skeptical about the sustainability of its growth momentum," said Yoshihisa Okamoto, senior vice president at Fuji Investment Management Co.
"Competition with the U.S. 'Big Three' automakers, especially in sport utility vehicles, will intensify and could possibly develop into a political issue," he said.
