Currency instability to affect Honda

Currency instability to affect Honda

TOKYO (AFP): Japan's Honda Motor Co. Ltd. said yesterday currency instability in Southeast Asia would have an impact on its earnings this year, biting into its automobile and motorcycle business there.

"Instability of South Asian currencies will have a certain impact on our earnings," Honda director Satoshi Aoki told a news conference as he announced the company's quarterly earnings.

"But as the impact is expected to be limited, we hope to absorb such losses," Aoki said.

Honda said its group pre-tax profit jumped 42.0 percent from a year earlier to 108.0 billion yen (US$947 million) in the three months to June.

Consolidated sales rose 15.3 percent to a June-quarter high of 1,418.7 billion yen, "due primarily to favorable sales of automobiles, in particular higher sales in North America and Europe," the car maker said.

"In addition to an increase in revenue, the company's continued cost cutting efforts and the depreciation of the yen positively affected the company's operating income," it said in a statement.

For the year to March, Honda kept its forecast of consolidated pre-tax profit at 390.7 billion yen on sales of 5,293.3 billion yen.

But Aoki said the company cut its car sales forecast for Thailand from 50, 000 to 45,000 units for 1997 due to the negative impact of the July 2 baht devaluation in Thailand.

The company also downgraded its motorcycle sales forecast from about 640, 000 units expected earlier to 560,000 units. In 1996, Honda sold 42,000 cars in Thailand and 640,000 motorcycles.

The official said the currency problems in Thailand and other Southeast Asian countries would have "almost no impact" on earnings as a whole.

"Given our small share of the Thai auto market, with our current annual output of around 50,000 units, the impact will be very small," he said.

"Any negative impact on Asian sales can be offset by firm auto demand in Indonesia and Brazil," the official said.

Honda's production in Thailand accounts for two percent of its total worldwide car production.

Honda said overall motor vehicle sales for the three months to June rose 11.3 percent from a year earlier to 573,000 units, with exports surging 16.5 percent to 388,000 units. Domestic sales rose 1.6 percent to 185,000 units.

Revenue from the motor vehicle sales 13.8 percent to 1,111.4 billion yen.

Motorcycle sales slipped 0.5 percent to 1.3 million units, with revenue here rising 16.5 percent to 200.6 billion yen.

"Motorcycle sales declined in Asia outside Japan, in particular in Thailand and China, which were offset, in part, by improved sales in Europe and Latin America," Honda said in the statement.

Revenue from other businesses, including power unit sales, grew 30.9 percent to 106.6 billion yen, it said.