Honda Motor Posts Higher Profit Despite Weak Car Sales in China — 2nd Update

By Kosaku Narioka

Honda Motor reported a rise in first-quarter net profit, thanks to stronger sales of hybrid vehicles and motorcycles despite weak car sales in China.

The Japanese automaker said Wednesday that net profit increased 8.7% from a year earlier to 394.66 billion yen, equivalent to $2.73 billion, for the three months ended June. That beat the estimate of Y338.90 billion in a poll of analysts by data provider Quick.

Honda said product-price increases and a weaker yen contributed to its earnings growth.

First-quarter revenue climbed 17% to Y5.405 trillion.

Operating profit for its car business rose 26% to Y222.84 billion owing to strong sales of gasoline-electric hybrid vehicles in Japan and the U.S.

Operating profit for its motorcycle business increased 24% to Y177.65 billion, as sales growth in India and Brazil offset a drop in Thailand.

Honda cut its forecast for group car sales in the year ending March 2025, citing weaker sales in China. It reduced its estimated sales in China by 220,000 vehicles this fiscal year after first-quarter sales in the country dropped 32% from a year earlier due to intense price cutting in the market.

Honda Chief Financial Officer Eiji Fujimura said the market for cars equipped with conventional internal-combustion engines is shrinking faster than expected. "It's a very challenging business environment," he said.

The automaker now expects to sell 3.90 million cars this fiscal year, down from its previous view of 4.12 million units. It continues to expect group motorcycle sales at 19.80 million units for the fiscal year.

Honda maintained its revenue and net profit forecasts for the year ending March 2025. It continues to expect revenue to decline 0.6% to Y20.300 trillion and net profit to drop 9.7% to Y1.000 trillion.

Rival carmaker Nissan Motor in July also lowered its annual vehicle-sales forecast due partly to projections for weaker sales in China.

Honda and other Japanese carmakers have long produced hybrid vehicles, but they trail behind companies such as China's BYD and Tesla in pure battery-electric vehicles.

Honda said in May that it planned to invest tens of billions of dollars in its electric-vehicle strategy through 2030. In China, it will introduce 10 Honda-brand EV models by 2027, it said.

A weak yen tends to increase the earnings of Japanese companies like Honda, as it makes exports more competitive overseas and boosts the value of profits earned abroad in yen terms.

However, the prospects of a weak yen driving earnings growth are now murkier as the Japanese currency has been strengthening against other major currencies since early July. The yen was recently around 147 to the dollar, compared with about 161 per dollar in early July.

--Chieko Tsuneoka in Tokyo contributed to this article.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

August 07, 2024 06:31 ET (10:31 GMT)

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