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Honda profit slumps on strong yen

Tokyo - Hit by a strong yen and fading sales in Japan, Honda reported a nearly 40% drop in quarterly profit but raised its full-year earnings forecast as a result of cost cuts.

Honda's October-December profit totalled ¥81.1bn, down from ¥134.6bn the year before, it said on Monday. Quarterly sales slipped by nearly 6% to ¥2.11 trillion.

A strong yen hurt Tokyo-based Honda's overseas earnings and the end of green car incentives crimped vehicle sales in Japan, offsetting the perk from strong motorcycle sales in Asia.

Honda was upbeat about the full fiscal year to end-March 2011, raising its profit forecast to ¥530bn from its October forecast of ¥500bn.

The revision was mostly from cost cuts and improved model offerings.

The maker of the Civic sedan, Odyssey minivan and Asimo robot lowered its full-year sales projection to ¥8.9 trillion from ¥9 trillion, mainly because the yen is expected to remain strong.

But the lowered projection still leaves Honda ahead of the previous fiscal year, when it posted ¥268bn profit on ¥8.58 trillion sales.

Honda said vehicle sales fell in Japan, because of the end of government incentives for green models last year, but improved in North America. Honda's vehicle sales also fell in Europe.

Among Honda's green car offerings are the Insight and CR-Z hybrid models, which are popular but trail the world's top-selling hybrid, the Prius from Japanese rival Toyota.

Honda sold 855 000 vehicles around the world from October to December, down 6.5% from 914 000 sold a year earlier. Japan sales slid to 118 000 from 177 000, while North American sales jumped to 364 000 from 344 000.

Honda said there were some signs of a gradual recovery in the key US market but acknowledged lingering worries about tighter credit and high unemployment. It was more optimistic about China and India, where it hopes to expand not only in cars but also in motorcycles.

The surging yen remains a risk for all Japanese exporters, including Honda. It said the dollar traded at about ¥83 during the three months, down from ¥89 a year earlier.

The negatives from currency rates erased ¥45bn from Honda's quarterly operating profit, it said.

Honda expects the dollar, now at about ¥82, to trade at ¥80 in the January-March quarter.

For the first nine months of the fiscal year, Honda's profit soared to ¥489.5bn, more than doubling from ¥196bn the same period the previous fiscal year.

Nine-month sales gained about 7% to ¥6.72 trillion.

Toyota, the world's top automaker in annual vehicle sales, reports earnings on February 8. Nissan, which outsold Honda globally last year to become Japan's No 2 vehicle manufacturer, reports earnings on February 9.

Honda shares lost 1.4% to close at ¥3 475 in Tokyo.

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