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Honda posts record net profit in first half

Oct 25 05:09 AM US/Eastern

Japan's second largest automaker Honda Motor Co. on Thursday reported record net profit for the six months to September and revised up its full-year forecast on strong sales overseas.
Honda is one of the pioneers of environmentally friendly cars, which have proven to be major hits, particularly in the United States, at a time of soaring oil prices.

"Our cost-cutting efforts in all of our business offset the negative effect from the foreign exchange rate and high prices of resources," Fumihiko Ike, a Honda managing director, told a news conference.

Honda enjoyed net profit of 374.6 billion yen (3.25 billion dollars) over the six months, up 38.1 percent from the same period a year earlier, a company statement said.

The automaker said its automobile sales rose 5.8 percent in the first half, despite a drop of nearly 15 percent in Japan.

Honda raised its projection of net profit for the full year to 640 billion yen, or an 8.0 percent rise from the previous 12 months, up from an earlier forecast of 625 billion yen.

It kept its full year forecast for operating profit at 880 billion dollars. However, it slashed its sales forecast to 12.3 trillion yen, a rise of 8.0 percent from the previous year but 50 billion yen below previous projections.

One concern is the exchange rate. The yen on average stood at 116 to the dollar in the second quarter to September, up from 117 yen in the first quarter, the company said.

The higher yen has negative effects on overseas sales as it makes Japanese exports less competitive overseas.

While North America accounted for more than 56 percent of Honda's total automobile sales in the first half, Asia and Europe were major engines of growth.

Honda's car sales jumped nearly 45 percent compared with the previous year. With the yen hovering around record lows against the euro, Honda's operating profit in Europe rose by some 75 percent in the first half.

Operating profit went up even more for operations in Asia outside of Japan, rising 86.7 percent. By contrast, operating profit inched up 1.4 percent in North America.

"A look at the global economy shows there are concerns about a slowdown in the US economy," the Honda statement said.

It also expressed concern about rapid fluctuations in crude oil prices.

Honda vice president Koichi Kondo said, however: "In terms of the problem of the US subprime housing loans, there is no conceivable effects so far on our four-wheel vehicle business."

Financial markets have experienced turmoil in recent months due to concern over the "subprime" sector, in which US customers with patchy credit histories defaulted on their mortgage payments.

Honda cashed in on its financial services business, where revenue grew by 38.1 percent in the six-month period. Honda reported a downturn in motorcycle sales, although it attributed the drop to a change in accounting methods.

The company as a whole said that operating income rose 28.1 percent in the first half to 508 billion yen as revenue grew 12.8 percent to 5.9 billion yen.

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