Honda has reported expected significant gains in revenue and earnings in the quarter ended 30 September 2012 (Q2 FY2013), versus the natural disaster-hit totals in the same quarter of the previous year, but has made major downgrades to its FY2013 forecasts previously outlined at the end of April 2012.
The company is now forecasting revenue of ¥9,800bn (US$123.0bn) in the 12 months to 31 March 2013, compared with the ¥10,300bn previously forecast, a ¥500bn or 4.9% reduction. Operating profit is now estimated at ¥520bn (margin of 5.3%), against ¥620bn (6.0%), a cut of 16.1%, and pre-tax income before equity contributions is forecast at ¥540bn, down 15.0% from the previous estimate of ¥635bn. The net income forecast for FY2013 now stands at ¥375bn, versus ¥470bn previously, a 20.2% downgrade.
Honda has said that the forecast revisions are “due mainly to decreased unit sales caused by factors such as changes in the business environment surrounding the company and unfavourable foreign currency effects.” The forecasts are based on exchange rate forecasts of ¥80:US$, unchanged from the previous forecasts, and ¥103:€ (previously ¥105:€). FY2013 vehicle sales are now estimated at 4,120,000, 180,000 (4.2%) less than the previous forecast level of 4,300,000. The lowering of sales expectations is driven by downgrades in Europe (now 205,000, versus 230,000 previously) and Asia (1,155,000, versus 1,310,000).
Despite these downgrades, the predicted FY2013 revenue is still 23.3% above the actual FY2012 result, while the estimates for operating, pre-tax and net profit are ahead 124.8%, 109.8% and 77.3%, respectively. The 124.8% increase in operating profit is forecast to be driven by volume/model mix (¥382.8bn) and lower costs (¥167.0bn), only partially offset by higher SG&A expenses (¥181.0bn), higher R&D costs (¥35.2bn) and adverse currency effects (¥45bn).
Honda’s unit vehicle sales in Q2 FY2013 totalled 996,000, against 678,000 in Q2 FY2012, a rise of 46.9% and a result that took the group sales in the year-to-date period to 1,995,000 (1,303,000; +53.1%).
Group revenue in the latest quarter was ¥2,271.2bn, 20.4% above the Q2 FY2012 result of ¥1,885.8bn, taking the April-September 2012 total to ¥4,707.1bn, versus ¥3,600.4bbn, a rise of 30.7%.
Q2 FY2013 operating profit was ¥100.8bn (margin of 4.4%), a gain of 92.1% from the Q2 FY2012 result of ¥52.5bn (2.8%), due primarily to an increase in the sales volume and model mix (¥70.1bn) and cost reductions (¥43.6bn), despite increased SG&A expenses (¥38.5bn) and R&D expenses (¥12.4bn) and unfavourable foreign currency effects (¥14.4bn). The year-to-date total was ¥276.8bn (5.9%), which was up 268.7% on the prior year total of ¥75.0bn (2.1%), again due primarily to an increase in the sales volume and model mix (¥244.4bn) and cost reductions (¥119.2bn), despite increased SG&A expenses (¥99.5bn) and R&D expenses (¥28.2bn) and unfavourable foreign currency effects (¥34.2bn).
In the automobile business operation alone, Q3 FY2013 revenue from sales to external customers increased 32.5%, to ¥1,766.2bn from the same period last year due mainly to an increase in consolidated unit sales, despite unfavourable foreign currency translation effects. Operating income totalled ¥37.1bn (margin of 2.1%), an increase of ¥66.2bn from the same period last year, due primarily to an increase in sales volume and model mix and cost reductions, which more than offset increased SG&A expenses and R&D expenses, and unfavourable foreign currency effects. In the year-to-date period, revenue rose 45.7%, to ¥3,656.7bn, while operating income totalled ¥137.7bn (3.8%), an increase of ¥243.1bn from the same period of the previous year.
Pre-tax and net earnings in the July-September 2012 quarter were ¥106.2bn and ¥82.2bn, representing increases of 38.8% and 36.1%, respectively from the prior-year results of ¥76.5bn and ¥60.4bn. The year-to-date totals were ¥301.0bn and ¥213.9bn, versus ¥105.8bn and ¥92.2bn, gains of 184.4% and 132.0%, respectively.
Speaking at a news conference, Executive Vice President Tetsuo Iwamura acknowledged that Honda expects production cuts to continue in China until the second half of November, after sales plunged in mid-September. According to a Reuters report, Iwamura said that production in China is likely to start recovering after that period, as the company expects growing vehicle demand ahead of and around a Chinese holiday season in February. Honda has cut its forecast of sales in China in calendar 2012 to 620,000 vehicles from its previous forecast of 750,000.
