Honda Motor Co's (7267.T) rosier forecasts and a surge in quarterly profit showed deep cost cuts could go a long way in absorbing currency losses, but Japanese rivals more dependent on exports may face a tougher second half.
Japan's No.2 automaker has raised its global car production for the past 10 months, with record output in China and other parts of Asia thanks to brisk demand in those markets.
Its market share in its most profitable U.S. market slipped during the quarter but North American production has also grown from the year before, driven by a gradual recovery there.
"Overall results are good and they are clearly not negative for shares, but we can't be too optimistic," said Ryosuke Okazaki, the chief investment officer at ITC Investment Partners.
"Honda raised its forecast, but this seems to be made up of heavy cost cutting, and not from a potential increase in sales."
Honda lowered its global car sales forecast by 25,000 units to 3.615 million vehicles, with cuts in North America, Europe and higher projections in Asia.
YEN WEIGHS
While Japanese automakers' domestic operations are losing money with the dollar's fall to a 15-year low against the yen, Honda's lucrative and ubiquitous motorcycle business is helping to cushion the blow.
Honda is also far less exposed to currency swings than rival Toyota Motor Corp (7203.T), building only about a quarter of its cars in Japan in the first half and selling 70 percent of that in Japan. In contrast, Toyota produced 44 percent of its vehicles in Japan during the same period, exporting just over half of that.
The fall in Honda's U.S. market share in the second quarter was largely due to a sales spike fueled by cash-for-clunker subsidies in the same period last year.
But fierce competition from Hyundai Motor Co (005380.KS) and its affiliate Kia Motors Corp (000270.KS) hasn't helped, especially given the yen's disadvantage against the South Korean won for exports.
Honda, the maker of the Accord and Fit models, on Friday reported an operating profit of 163.47 billion yen ($2.02 billion) for the July-September quarter, up 150 percent on a year ago and roughly in line with the average 167 billion yen estimated by three analysts surveyed by Reuters.
Second-quarter net profit, which includes earnings made in China, was 135.9 billion yen, also up 150 percent, from 54 billion yen a year earlier. Sales grew 9.5 percent to 2.25 trillion yen.
For the year to March 31, 2011, Honda now expects an operating profit of 500 billion yen, up 37 percent from last year and above its previous forecast of 450 billion yen. A survey of 19 analysts by Thomson Reuters I/B/E/S forecasts profit of 524 billion yen.
A day earlier, Hyundai posted a forecast-beating quarterly profit as it outperformed rivals in the United States and Europe. Kia on Friday reported a record quarterly profit as customers flocked to its new models.
In contrast, Japan's export-heavy Mazda Motor Corp (7261.T) lowered its full-year operating profit forecast on Friday to 25 billion yen from 30 billion yen. Its second-quarter operating profit fell 1.9 percent to 5.81 billion yen.
Mazda, held 11 percent by Ford Motor Co (F.N), lifted its annual net profit forecast to 6 billion yen from 5 billion yen.
Honda changed its dollar rate assumption for the October-March second half to 80 yen from 85 yen. The dollar was trading around 80.70 yen on Friday in Tokyo.
Shares of Honda have risen about 9 percent in the past three months, outperforming Tokyo's transport sector subindex .ITEQP.T, which was flat, and the Tokyo market .TOPX, which fell 6 percent.
Its shares ended down 0.3 percent at 2,937 yen before the results were announced.
