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Honda Posts Q4 Net Loss of $2 Billion, but Ekes Out Full Year Return of $1.5 Billion

The Japanese company joins a long list of loss-making auto companies, and predicts next year will be worse.

by on Apr.28, 2009

Honda

Honda is cutting spending on new models, an ominous trend for a company known for its R&D.

Honda Motor Company, the second larger automaker in Japan, reported in Tokyo today a net loss of almost $2 billion, ¥186.1 billion, for its fiscal fourth quarter ending March 31, 2009. The loss was, not surprisingly, attributed to a global decline in demand for its fuel-efficient vehicles.

Honda still managed to show a profit for the full year of  $1.46 billion, ¥137.0 billion, a decrease of 77% compared to the previous a year. Honda is, however, predicting a further decline in results next year to ¥40 billion, a 71% decrease, as the effects of the global Great Recession drag on. Competing Japanese companies, Toyota and Nissan, are expected to post large, full-year losses this year.

Honda sales this year, except for Motorcycles, declined. Motorcycles, at 10.114 million units, rose +8.5%; Automobiles, at 3.517 million units were off -10.4%; and Power Products, 5.187 million units, declined -14.4%.

Next year, Honda predicts that Motorcycle sales will decline to 8.595 million units or -15%; Automobiles will go down to 3.21 million units, -8.7%; Power Products will be off -10.2%, at 4.66 million units.

In 2009, consolidated operating income amounted to ¥ 189.6 billion, $2 billion, and a drop of 80%, due to decreased profit from lower revenue, increased raw material costs,  an increase in fixed costs per unit as a result of reduced output.

The appreciation of the Japanese yen also hurt results, as did the write-down and expenses related to Honda’s sale of its ultra-expensive Formula One racing team. Honda also incurred costs for cancellations of the development of new models, perhaps the most ominous development for the research-oriented firm.

Honda plans to distribute quarterly cash dividends of ¥8 per share for each quarter for the year ending March 31, 2010. The total cash dividends for the fiscal year ending March 31, 2010 are planned to be ¥32 per share, a decrease of ¥31 from the annual dividends to be paid for the year ended March 31, 2009.

Yen (billions) 4th quarter
ended
March 31, 2008
4th quarter
ended
March 31, 2009
Difference
(% change)
Status of the fiscal 4th quarter ended
March 31, 2009
Net sales and other operating revenue 3,055.5 1,783.8 -1,271.6 (-41.6) Decreased  2nd consecutive year
Operating income (loss) 168.8 (283.0) -451.8 Decreased 3rd consecutive year
Income (loss) before Income taxes 146.8 (309.5) -456.4 Decreased  3rd consecutive year
Equity in income of affiliates 24.3 2.7 -21.6 (-88.7) Decreased first time in 2 years
Net Income (loss) 25.4 (186.1) -211.5 Decreased3rd consecutive year

Exchange rate:  Honda’s average rates for this fiscal 4th quarter: ¥94=$1 / ¥121=€1; for previous fiscal 4th quarter: ¥106=$1 /  ¥158=€1

Yen (billions) Fiscal year ended
March 31, 2008
Fiscal year ended
March 31, 2009
Difference
(% change)
Status of fiscal year 2009
Net sales and other operating revenue 12,002.8 10,011.2 -1,991.5 (-16.6) Decreased first time in 9 years
Operating income 953.1 189.6 -763.4 (-80.1) Decreased first time in 2 years
Income before Income taxes 895.8 161.7 -734.1 (-81.9) Decreased first time in 2 years
Equity in income of affiliates 118.9

99.0

-19.9 (-16.7) Decreased first time in 10 years
Net Income 600.0 137.0 -463.0 (-77.2) Decreased  first time in 2 years

Exchange rate:  Honda’s average rates for the fiscal year ended March 31, 2009: ¥101=$1 /  ¥142=€1; for fiscal year ended March 31, 2008: ¥114=$1 /  ¥162=€1

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