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Honda Motor Q2 profit tanks

Japanese automaker Withdraws outlook on uncertainties,including currency,Thai floods.

Written by Agencies | Tokyo |
October 31, 2011 12:10:25 pm

Honda Motor Co withdrew its annual earnings guidance in an unusual move on Monday due to uncertainties including currency markets and Thailand’s floods just as it was starting to recover from the March earthquake and tsunami.

Among Japanese automakers,Honda has been hit the hardest by both disasters this year,recovering slowly from the supply disruption in northeast Japan and suffering direct damage at its Thai car factory in the Ayutthaya industrial estate.

The maker of the popular Civic and Accord models had been preparing to ramp up overall car production to 125 percent of pre-quake plans in the October-March second half to build up inventory that had fallen after the March 11 disasters.

The dearth of cars has pushed down Honda’s sales in the United States,its biggest market,ranking it below Nissan Motor Co in the last three months.

Honda also withdrew its forecast for its annual global car sales amid an indefinite suspension of work at its flooded Thai factory. It had previously forecast 3.512 million vehicles.

For the July-September second quarter,Japan’s third-biggest automaker posted a 68 percent drop in operating profit to 52.5 billion yen ($693 million) due mainly to a shortage of microchip controllers from Renesas Electronics Corp . That was worse than a consensus estimate of 63.5 billion yen from a Reuters survey of 13 analysts.

Net profit,which includes earnings made in China,fell 55.5 percent to 60.43 billion yen,also hammered by a sharp rise in the yen. On Monday,the dollar spiked to a three-month high above 79 yen after Japan intervened to stem the yen’s rise.

Second-quarter revenues fell 16 percent to 1.9 trillion yen.

While supply issues are set to drag on into next year,Honda also faces tougher competition from a fast-growing Hyundai Motor Co and Nissan,especially after its core Civic sedan got panned by influential U.S. consumer watchdog Consumer Reports.

Honda’s shares have lost 22 percent so far this year,underperforming falls of 18 percent and 6.5 percent at Toyota Motor Corp and Nissan,respectively.

Before the results were announced,Honda shares closed down 3.7 percent on a newspaper report that a recovery from the Thai floods could take six months. The benchmark Nikkei average settled 0.7 percent lower.

Nissan will report second-quarter earnings on Wednesday and Toyota on Nov. 8. ($1 = 75.760 Japanese Yen)

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