Honda has record profit but lowers sales forecast

TOKYO -- Honda, Japan's No. 2 automaker, earned a better-than-expected 179.6 billion yen ($1.68 billion) in the April-June quarter, up 8.1% from the same period the previous year. Analysts surveyed by Thomson Financial had forecast 131.3 billion yen ($1.2 billion) in quarterly profit.

Sales dipped 2.2% from a year ago to 2.867 trillion yen ($26.79 billion), largely because the rising yen eroded the value of overseas earnings. If the yen's value had held at levels of a year ago, sales would have jumped about 7%, Honda said.

Riding on its reputation for making cars with good mileage, the manufacturer of the Civic and Accord compacts has racked up solid results despite worries among automakers about a U.S. slowdown and rising steel prices.

Honda sold more vehicles worldwide than in any other fiscal first quarter at 962,000 vehicles, up 1.7% on year.

Cost-cutting, the decrease of auto discounts in North America and a lift from equity-related income from Chinese affiliates added to a strong performance, according to Honda.

Demand for Honda products is booming in Asia, Brazil and other new markets, making up for declines in vehicle sales in the U.S., Europe and Japan, it said.

Honda was the only automaker to record better U.S. sales in June compared with a year ago, while others saw sales plummet in the worst June for the industry in 17 years.

Still, Honda lowered its vehicle sales forecast for the fiscal year through March 2009 to 4.08 million vehicles, less optimistic than its earlier prediction for 4.14 million vehicles. The lowered forecast marks a 3.9% jump from the previous year.

The forecast downgrade is largely because of faltering auto sales in North America, where Honda, like other automakers, is adjusting production away from trucks to smaller fuel-efficient models that are more attractive to buyers as gas prices go up.