Honda posts strong first quarter on Asia sales, raises annual profit forecast

TOKYO (Reuters) – Honda Motor Co. posted a better-than-expected quarterly profit as higher vehicle sales in Asia helped offset a slide in North American demand, and drove up its forecast for the year citing a more favorable currency exchange rate.

Operating profit at Japan’s No. 3 automaker came in at 269.2 billion yen ($2.44 billion) in the April-June period, compared with 266.84 billion yen a year ago and above an average estimate of 230.43 billion from seven analysts polled by Thomson Reuters.

For the year to March, Honda now expects an operating profit of 725 billion yen, versus 705 billion yen forecast earlier. It said it now sees the U.S. dollar averaging around 107 yen, from a previous forecast of 105 yen.

Sales in Asia, including China – which the automaker expects will surpass North America as its largest market this year, jumped 10.8 percent to 523,000 units. This offset a 7.6 percent slide in North American vehicle sales to 480,000 units.

Slowing demand in the U.S. auto market, the world’s second largest after China, is delivering a knock to many global automakers after years of growth boosted profits following the global financial crisis.

Honda expects sales in North America to slip 2.5 percent in the year to March as it struggles to sell sedans, including its top-sellers the Civic and the Accord, along with smaller models like the Fit hatchback – all of which have fallen out of fashion as drivers demand bigger models.

Honda has been ramping up production of SUVs to keep up with the stronger demand for larger vehicles in the United States.

Overall, Honda sold around 792,000 vehicles in the United States in the January-June period, down 0.1 percent from a year ago, according to Autodata figures.

Honda’s profit rise comes after Nissan last week posted an almost 13 percent slide in operating profit, stung by rising incentives to sell its cars in the competitive U.S. market.