July 30, 2014 3:54 am JST

Honda eyes first record profit in 7 years in fiscal 2014

The tax increase had only a minimal impact on Honda, according to Executive Vice President Tetsuo Iwamura.

TOKYO -- Honda Motor on Tuesday upgraded its full-year net profit guidance by 5 billion yen ($48.6 million) to 600 billion yen, with brisk Japanese sales of new compacts and minicars seen overcoming a slump after April's consumption tax hike.

     The new estimate is on a par with the automaker's current record of 600.03 billion yen, set in fiscal 2007.

     The upgrade resulted from a revision to projected exchange rates. Honda had initially assumed 100 yen to the dollar and 135 yen to the euro but changed these Tuesday to 101 and 136. Each 1 yen weakening against the greenback lifts annual operating profit by 12 billion yen.

     In contrast to fiscal 2013, when the softening yen provided a significant boost, Honda had originally estimated that exchange rates would push profits down by 67 billion yen this fiscal year. This improved to 57 billion yen after the revision.

     Honda has also maintained strong new-car sales even after the tax hike, belying fears of a downturn after the pre-hike surge. April-June domestic sales volume swelled 44% on the year thanks to last fall's release of the redesigned Fit and increased minicar sales.

     Sales in Asia, including India and Indonesia, grew 11%. They slid 3% in the expanding North American market, partly on minor delays in rolling out new vehicles. But total worldwide sales volume rose 6% to 1.06 million units.

     So quarterly consolidated sales climbed 5% to 2.98 trillion yen, and net profit grew 20% to 146.5 billion yen. Honda booked early a 15 billion yen gain from selling carbon credits, making up for higher recall costs and such weak emerging-market currencies as the real.

     A number of automakers will likely use stronger overseas sales to compensate for struggling domestic business after the tax hike. Meanwhile, Honda timed the release of strategic models with the tax increase in mind, minimizing its impact.

     Full-year domestic sales volume is seen growing 21% to an all-time high of 990,000 vehicles. The company is aiming for record worldwide sales of 4.83 million units, up 12%, with the release of new models in Southeast Asia. Sales are expected to grow 8% to a high of 12.8 trillion yen.