Honda trims full-year profit forecast, says China sales poorer

TOKYO (REUTERS) - Honda Motor has trimmed its annual net profit forecast by 1.3 per cent to 370 billion yen (S$5 billion) on poorer-than-expected car sales in China and Europe, even as it sees strong sales in the United States, its biggest market.

Japan's third-biggest automaker said its net profit for Oct-Dec was 77.4 billion yen, compared with the 47.7 billion yen booked last year when it suffered from disrupted supply chains after floods hit it and its suppliers' factories in Thailand.

"The market had expected the company to release a bright outlook on the back of a weakening yen," said Mr Yoshihiro Okumura, an analyst at Chibagin Asset Management. "It was negative that the company did not raise its full-year outlook. Now, investors will be watching how the carmaker will try to raise sales in the core US market this year."

Honda, which relies on the US for 40 per cent of its global sales, maintained its North American car sales forecast for the year to March. For rivals Toyota Motor and Nissan Motor, the US accounts for about a quarter of global auto sales.

In calendar year 2012, the US auto market posted its strongest sales figures since 2007 at 14.5 million vehicles, and the momentum is likely to continue into January.

Honda cut its global car sales forecast to 4.06 million vehicles from 4.12 million, and its European car sales outlook to 185,000 vehicles from 205,000.

In China, Honda sold 604,000 vehicles last year, lower than the initial goal of 750,000 it set before sales started falling in September. The financial year in China ended in December.

Japanese brands in China suffered from an outbreak of anti-Japan sentiment late last year after the two countries became embroiled in a diplomatic dispute over islands both claim as their own. The pace of recovery in China is slower than Honda had expected, executive vice-president Tetsuo Iwamura said.

In the final quarter and the next business year, Japanese carmakers will be helped by the yen's recent weakening against the US dollar, as they can convert overseas profits back to the yen at a more favourable rate and export cars more cheaply.

The Japanese currency is trading around 91 to the dollar, well down from 78 at the start of the October-December quarter.

Honda changed its average dollar rate assumption to 81 yen from 80 yen for the financial year that ends in March. For the fourth quarter, its dollar rate assumption is 85 yen, executives said.

"Since the yen is trading at around 90 yen at the moment, it may be the case that 85 yen is conservative. But the currency moves at the end of 2012 were very sudden, and we do not know what will happen in February and March," chief financial officer Fumihiko Ike said.

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