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TOKYO -- Honda reported a 3 percent dip in profit Wednesday for the first fiscal quarter although auto sales surged to a record high as losses on its financial assets chipped away at income.

Group net profit at Honda Motor Co. for the quarter ended June 30 totaled 110.6 billion yen, or $983 million, down from 114.2 billion yen the same period the previous year. Sales for the quarter totaled 2.26 trillion yen, or $20 billion, up 9 percent from 2.07 trillion yen a year ago.

Cost cuts helped boost Honda's operating profit, offsetting higher administrative and research expenses, the Tokyo-based automaker said in a statement. But valuation losses from derivative products caused by a drop in long-term interest rates reduced the company's income, it said.

Honda's auto sales have been booming at home and abroad. Sales in North America grew 7 percent to 420,000 vehicles. It sold 167,000 vehicles in Japan for the first quarter, up 8 percent from the same period a year ago. It sold 673,000 vehicles abroad, up 9 percent from 2004.

Honda raised its forecast for the full fiscal year ending March 2006, to 470 billion yen, or $4.2 billion, up from the forecast it gave in April for 450 billion yen ($4 billion) profit. But the revised forecast was lower than what Honda earned in fiscal 2004 at 486 billion yen.

Honda is expecting sales for the full fiscal year at 9.43 trillion yen ($84 billion), up from the previous forecast for 9.3 trillion yen ($83 billion) sales and last fiscal year's sales at 8.65 trillion yen.

President Takeo Fukui has said Honda aims to boost annual vehicle sales over the next three years to 4 million vehicles. It also hopes to increase annual sales to 10 trillion yen ($89 billion) by the fiscal year that ends March 2008.

In the year that ended in March, Honda sold 3.24 million vehicles. Honda is planning to sell 3.415 million vehicles for the fiscal year ending March 2006.

At a time when U.S. rivals, including General Motors Corp. and Ford Motor Co. are struggling, Japanese automakers are on a roll.
 
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