Honda cuts annual forecast as 3Q profit tumbles

Honda Motor Co. slashed its annual profit target by over half Friday as profit tumbled 90 percent in the latest quarter, hit by rising costs, a stronger yen and falling sales in key markets.

Japan's No. 2 automaker said net profit for the October-December period was 20.24 billion yen ($224.9 million) versus 200 billion a year earlier.

Honda's earnings numbers, while grim, still beat expectations and showed that Honda may be faring better than its Japanese rivals amid the downturn. Analysts surveyed by Thomson Financial had forecast an average 19.75 billion yen in quarterly profit.

"The results were a lot better than expected. Honda is doing well, relative to the other Japanese car makers," said Credit Suisse auto analyst Koji Endo.

The maker of the popular Accord and Civic models cut its profit target for the fiscal year through March by 57 percent, to 80 billion yen ($888.9 million) from 185 billion yen. It also lowered its revenue target by 3 percent to 10.1 trillion yen.

Still, that profit forecast isn't as bleak as the outlook for other Japanese automakers.

Toyota Motor Corp., the country's top automaker, has said it expects its first operating loss in 70 years this fiscal year, and media reports and analysts predict Nissan Motor Co. will also book a loss for the period. Toyota is due to report fiscal third quarter earnings next Friday, and Nissan is to report later in February.

For the latest quarter, Honda said revenues fell 17 percent, to 2.53 trillion yen from 3.04 trillion yen.

Honda said it spent more on raw materials such as steel and had higher sales costs compared to a year earlier. Foreign exchange also took its toll, as the yen has hovered around 13-year lows near 90 yen, compared to levels above 110 yen the previous year.

The company said it sold fewer vehicles in Japan, North America, and Europe during the quarter, but reported strong growth in Asian countries.

This follows Honda's announcement last week that its global production in 2008 rose to a record high, with booming demand in China offsetting sluggish sales in the United States and Europe.

Despite the stronger sales in Asia, Honda has still had to move quickly to lower expenses and adjust production as the global recession sets in.

The company has announced job cuts and scaled back production at manufacturing lines worldwide. The measures include cutting all of its temporary workers by April of this year.

Honda's results came a day after U.S. rival Ford Motor Co. said it lost $5.9 billion in the fourth quarter, leading to the worst annual loss in its 105-year history.

Honda released its earnings after stock trading had finished Friday, when its shares plunged 9.2 percent to 2,070 yen.