HomemadeTurbo - DIY Turbo Forum - Honda Posts $1.4 Billion Profit

Honda Motor Co. ran up a $1.9 billion loss during the fourth quarter of the Japanese fiscal year because of lower revenues, higher raw materials costs and unfavorable currency trends.

Honda managed, however, to show a $1.4 billion profit for the year ended on March 31 when it reported its full-year results Tuesday.

Most of its Japanese rivals have forecast losses for the fourth quarter and for the year because of a global slump in vehicle sales that has pushed two of Detroit’s automakers to the brink of bankruptcy.

By comparison, Honda’s results look good. But, in a sign of how tough the industry has become, its annual earnings amounted to less than a fourth of the previous year’s profit.

Honda, the first of Japan’s automakers to report its results, predicted it would continue to lose money during the first half of the fiscal year begun April 1.

But it said it expected to return to profit in the second half and show a small profit for the year.

Investors were pleased with the results, which were better than what Honda had predicted in January.

Investment firm Nikko Citigroup reiterated a buy rating on Honda shares, crediting the company’s cost-cutting moves for the better-than-expected results.

Honda has shed nearly all of its temporary workers and cut administrative expenses and research and development outlays to save money.

Other belt-tightening efforts, including cancelling new models and dropping some racing activities such as Formula One, which incurred expenses that weighed on its fourth-quarter results, Honda said.

Its fourth-quarter revenue was down 41.6 percent at $18.2 billion. Stripping out the effect of currency swings, its revenue was down 30 percent.

“This was a good result for Honda,” Koji Endo, a Tokyo-based analyst for Credit Suisse, told the Associated Press.

He said the automaker’s operating profit forecast of 10 billion yen, or $102 million, was a “very low number, but this is a strong message by management that they will avoid a loss this year.”

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