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Honda Earnings Down, Longer-Term Forecast Up – For Now

Rising yen causing big troubles.

by on Oct.29, 2010

U.S. sales up but margins down for Honda as the dollar continues to slide against the yen.

Honda is raising its profit forecast for the current fiscal year – even as the rising yen takes a toll on its current performance.

The maker forecasts it will earn 500 billion yen – or $6.2 billion – for the fiscal year ending March 31, 2011, a sharp increase from an earlier forecast of 455 billion yen.  But the upside projection was tempered by news that second-quarter earnings fell 15%, largely as the result of a rising yen that has made it increasingly difficult to market products abroad, especially in key markets like the U.S., without slashing margins.

The project full-year numbers actually disguise the degree of trouble facing the maker, however.  Honda has now earned 408 billion yen for the first half of the fiscal year.  Net income for the final six months, it forecast, should slip to just 92 billion, despite a strong operating performance.

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The upwards pressure on the yen versus and dollar and the yen versus the euro has created what Honda executives describe as an acute market crisis, despite the rise in the company’s operating income, which increased by 149.4% in the second fiscal second quarter, ending Sept. 30.

Honda executive vice president Koichi Kondo said Honda has already been working to procure lower-priced parts from overseas suppliers. “It is natural that the strong yen is accelerating this drive,” Kondo said at Honda’s earnings press conference.

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