TOKYO (AFP) — Honda Motor Co. said Friday its net profit rose 8.1 percent to hit a record high for the fiscal first-quarter on brisk demand in emerging markets such as China and Brazil.
But Japan's second-largest automaker kept its forecast for a slide in annual earnings due to a weaker global economy, a stronger yen and the soaring cost of raw materials including steel.
The company posted net profit of 179.61 billion yen (1.68 billion dollars) for the three months to June.
Operating profit edged down 0.2 percent from a year earlier to 221.35 billion yen as revenue dropped 2.2 percent to 2.87 trillion yen.
Solid demand in Asia and emerging markets such as Brazil buoyed Honda's earnings, said executive vice president Koichi Kondo.
But he warned of risks ahead, including a slowing economy, currency movements and higher fuel prices at the pump.
"In the first quarter alone, we saw a significant rise in material prices. We expect more price rises to come," he told reporters. "If the current weak industry trend continues, we must reform drastically."
Honda cut its forecast for operating profit for the full fiscal year to March to 630 billion yen from 650 billion yen previously, which would mark a 33.9 percent plunge from the previous year.
Net earnings are expected to fall 18.3 percent to 490 billion yen as revenue edges up 1.1 percent to 12.13 trillion yen.
Honda sold 962,000 vehicles in the first quarter, up 1.7 percent from a year earlier. Weak demand in Japan, where sales fell 5.9 percent, was offset by robust demand in emerging markets. Automobile sales in North America slipped 1.1 percent to about 460,000 vehicles.
Japanese automakers have enjoyed brisk profits in the giant US auto market in recent years, helped by firm demand for fuel-efficient cars and a weak yen.
But a US economic slowdown, a falling dollar and soaring raw materials costs are now weighing on their earnings prospects.
Honda has reduced its global production as it shifts resources away from sports utility vehicles and into small cars, Kondo said.
"We have been trying to build flexible production systems," he said. "Our future competitiveness will depend on how fast we can change and how flexible we can be as market conditions change."
Honda, along with rival Toyota Motor, is one of the pioneers of environmentally friendly cars, which have proven to be major hits, particularly in the United States, at a time of soaring oil prices.
Honda plans to introduce in early 2009 a low-cost hybrid, which are equipped with an electric motor and a standard petrol engine and are more economical and environmentally friendly than conventional autos.
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