UPDATE 2-Honda hoists profit forecast, sees further growth

* Q3 op profit Y177 bln vs consensus Y85 bln

* Raises FY op prft f’cast to Y320 bln vs consensus Y237 bln

* FY2010/11 can see qtrly op profit of Y100 bln – exec

* U.S. Jan sales data shows Honda sales growth lags market

* Shares rise 2.3 pct ahead of results
(Adds executive, fund manager comments, details)

By Chang-Ran Kim, Asia autos correspondent

TOKYO, Feb 3 (BestGrowthStock) – Honda Motor Co (7267.T: ) lifted its
annual guidance far beyond market expectations on Wednesday after
cost cuts drove quarterly profit to the strongest in a year and a
half, and said it anticipates further growth next financial year.

Japan’s No.2 automaker has weathered the industry’s turmoil
better than many rivals as its profitable and dominant motorcycle
business cushioned the blow to global car demand from the
financial crisis.

Honda’s car business, heavy in fuel-efficient models such as
the Civic and Jazz, has also turned up over the past three
quarters thanks to government sales incentives such as the United
States’ cash-for-clunkers programme last summer.

With its car sales roughly on track to rech 3.6 million
vehicles next business year, a top executive said Honda should be
able to make an operating profit of about $1.1 billion per
quarter, providing a rare insight into the outlook for the
financial year starting on April 1.

“Under these sales conditions, I see a fundamental ability to
make 100 billion yen in operating profit every quarter,”
Executive Vice President Koichi Kondo told a news conference.

That would indicate a full-year operating profit of 400
billion yen for the year to March 2011, or up 25 percent from
Honda’s revised guidance of 320 billion yen for this year.

Honda may also benefit from the global recall of millions of
vehicles by larger rival Toyota Motor Corp (7203.T: ), particularly
in the key U.S. market, although Kondo — and analysts — said
the opposite could also happen. [ID:nN27231388]

“There’s a chance that the image of all Japanese cars will
worsen in North America and elsewhere,” said Mitsushige Akino,
chief fund manager at Akiyoshi Investment Management. “We just
don’t know. There are things we still can’t predict.”

Honda had to initiate a recall of its own last week, saying
it would recall some 646,000 of its Fit/Jazz and City models
globally due to a faulty window switch after a child died when
fire broke out in a car last year. [ID:nLDE60S0MD]

“Toyota is the front-runner representing Japanese cars,”
Honda’s Kondo said. “In that sense, we’re somewhat worried that
there may be a knock-on effect on other Japanese brands, but
we’ll need a little more time to gauge any impact.”

U.S. auto sales data for January released on Tuesday showed
Honda’s seasonally adjusted sales growing just 2.9 percent in an
overall market that grew 15 percent. [ID:nN02116031]

Honda said on Wednesday its operating profit for the
October-December quarter jumped 73 percent to 177 billion yen
($1.96 billion), marking its biggest profit in six quarters.

That beat a mean estimate of about 85 billion yen in a poll
of three analysts by Thomson Reuters I/B/E/S.


For a graphic on Honda results:




For the full year to the end of March, the maker of the Civic
and other fuel-efficient cars lifted its operating profit
forecast to 320 billion from a previous estimate of 190 billion
yen, and well above a mean estimate of 237 billion yen in a poll
of 20 analysts by Thomson Reuters I/B/E/S.

The new figure represents a 69 percent jump from last year.

Honda kept its forecast for global sales unchanged at 3.4
million cars for this financial year. It attributed the biggest
part of the overshoot in operating profit to a 35 billion yen
boost from lower spending on research and development.

It now expects net profit to nearly double from last year to
265 billion yen.

The company, headed by CEO Takanobu Ito, had also raised its
full-year forecasts in both its first- and second-quarter
earnings releases.

Honda is the first of Japan’s top three automakers to report
results for the latest quarter.

Toyota, which is grappling with a massive global recall that
is forcing it to halt production of eight models in North America
this week, is scheduled to announce its results on Thursday.

Earlier on Wednesday, smaller Japanese rival Mitsubishi
Motors Corp (7211.T: ) kept its full-year financial forecasts

Denso Corp (6902.T: ), the world’s biggest listed auto parts
supplier and an affiliate of Toyota, tripled its annual operating
profit forecast to 110 billion yen, citing a recovery in global
auto production and deeper cost cuts.

“Our latest forecast does not include any impact from
Toyota’s production halt because we had made it before Toyota
announced the suspension,” senior Denso manager Naohito Tainaka
told reporters.

“There will be some impact in the short term but Toyota may
boost its output to make up for the suspension by the end of this
business year, so it’s difficult to foresee the impact on our

Shares of Honda have gained 8 percent since late October,
when it nearly tripled its full-year operating profit forecast,
outperforming a 1.4 percent increase in the benchmark Nikkei
average. (.N225: )
($1=90.51 Yen)

Penny Stocks

(Additional reporting by Taiga Uranaka, Elaine Lies and Nobuhiro
Kubo; Editing by Michael Watson)

UPDATE 2-Honda hoists profit forecast, sees further growth