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Honda profit plunges, but lifts forecasts

Tokyo - Japan's third-largest automaker Honda Motor on Monday said its net profit for the April-June quarter fell nearly 90% on the strong yen and the impact of the March disasters on production and sales.

However, it raised its forecasts for the full year from earlier estimates in reflection of a faster-than-expected recovery of parts supplies that were heavily disrupted by the March 11 earthquake and tsunami.

The maker of the Civic and Accord said net profit for the fiscal first quarter ended June 30 plunged 88.3% to ¥31.7bn.

Net sales fell 27.4% to ¥1.7 trillion compared to the same period last year, while operating profit tumbled 90.4% on-year to ¥22.5bn.

The slump was "mainly caused by the impact of the Great East Japan Earthquake... and the unfavourable foreign currency translation effects," Honda said in a statement.

Honda profits have been hit by a loss in production, decreased sales and restoration costs, effects that have been compounded by the rise of the yen against the dollar and euro as well as higher raw material costs.

A strong yen makes it more expensive for Japan's automakers to domestically produce vehicles for sale overseas, while earnings earned abroad are eroded when repatriated.

The unit is currently trading in the top end of the ¥77 to the dollar range, near its postwar high of ¥76.25 struck in March.

However, Honda raised its net profit forecast to ¥230bn this financial year from a June estimate of ¥195bn, although the latest figure represented a 56.9% drop from the year-earlier profit.

Annual operating profit was expected to slide 52.6% on-year to ¥270bn, better than a June forecast of ¥200bn. Global sales are now expected fall 2.7% on-year to hit ¥8.7 trillion, from ¥8.3 trillion forecast in June.

Honda is the second of Japan's big-three automakers to report April-June quarter earnings, after Nissan said last week net profit in the period fell by 20.3% on-year to ¥85bn.

Japan's biggest automaker Toyota reports earnings on Tuesday.

The 9.0-magnitude earthquake and tsunami on March 11 destroyed entire towns, left more than 20 000 dead or missing and crippled power-generating facilities, including a nuclear power plant at the centre of an ongoing crisis.

Japanese firms were hit hard by power and chronic parts supply shortages, with the likes of Nissan, Toyota and Honda having to sharply cut production and shut plants due to a lack of crucial components.

Honda's recovery has been slower than its peers, seeing June production decline 44.5% on-year compared to a 7.9% fall for Toyota and growth of 18.5% for Nissan.

Japan's automakers are ramping up their hiring of temporary workers to help catch up with demand as supply chains recover. Toyota has said it planned to hire up to 4 000 contract workers, while Honda plans to hire around 1 000.

Honda shares closed up 1.46% at ¥3 125 in Tokyo on Monday ahead of the announcement.

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