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After posting positive 1Q results, Honda remains cautious for 2003, while Mazda guides higher.
April 25, 2003: 7:03 AM EDT
TOKYO (Reuters) - Japanese car makers Honda Motor Co. and Mazda Motor Corp. posted bumper profits Friday as they sped past rivals, but mapped out different roads for the year ahead, with Honda taking a more wary approach.
Most of Japan's top five automakers are forecasting a further rise in profits for the current business year, but Honda warned that its operating profit would fall due to unfavorable exchange rates, a tough market at home and a slower rate of growth in the crucial U.S. market.
"The domestic market has been and will continue to be severe, mainly because of the economy," Executive Vice President Koichi Amemiya told reporters, acknowledging that Honda was pushing back from its goal of one million domestic vehicle sales in 2004-2005.
"We are pushing it back but are not, by any means, giving up," he said.
Honda, the country's second-biggest carmaker, has forecast its vehicle sales in Japan will edge up 0.7 percent to 855,000 units in the year that began April 1.
For 2002-2003, Honda reported a 7.8 percent rise in operating profit to a record ¥689.45 billion, or $5.75 billion, better than the company's estimate of ¥660 billion and a median forecast of ¥665 billion in a survey of 22 brokerages by Reuters Research.
For 2003-2004, Honda forecast a decline to ¥620 billion, although investors appeared to take that in their stride.
Honda said the stronger yen would take a big bite out of its profits this year -- ¥111 billion versus one billion last year -- estimating an average exchange rate of ¥116 to the dollar for this year compared with ¥122 in the past year.
Honda's profit projection is in stark contrast to brokerages, which expect the automaker to continue its healthy run in the United States with a profit of nearly ¥700 billion.
While Honda said it expected operating income to fall, it still projected sales and income on a net and pretax level to rise to records.
Net profit was seen rising 3.1 percent to ¥440 billion after a record ¥426 billion in the year just ended.
Amemiya also played down suggestions that depressed consumer sentiment in North America could seriously hurt the automaker in its most important market.
"The North American market is going to be challenging and slightly lower than last year, but with annual industry-wide sales of over 16 million, it's not going to be dire," he said. "Our light truck sales are doing well, as is our new Accord sedan, and we do not expect to use as many sales incentives as we did in the past year."
Mazda turns to Europe
In contrast to Honda's cautious assessment, fifth-ranked Mazda said it expected its highest income in a decade this year after posting a 77 percent jump in operating profit last year.
"We had a turnaround last year, we met our objectives this year, and we're going to continue to progress next year," President Lewis Booth told Reuters in an interview.
Mazda was not as successful as Honda in North America last year and projected a further 3.6 percent fall in sales there, partly due to the need to slim down its high inventory.
"We have an inventory problem in the U.S. now. (But) it will come down because we've actually cut production to help us get them down," Booth said.
In Europe, Mazda expects another double-digit jump in sales this year, thanks to the popularity of the Mazda6/Atenza sedan and the launch later this year of two other all-new models, including the RX-8 sports car.
Despite the bullish outlook, Mazda's stock closed down 1.9 percent at ¥207, down about eight percent for the year. Honda's shares lost 5.7 percent to end at ¥3,630, down about 17 percent this year.
Analysts have pointed to increasing risks for the industry from a possible slowdown in the U.S. economy despite the end of hostilities in Iraq. But they say Honda is well positioned to ride out a downturn thanks to an improved product mix.
Its factories are running at full capacity at a time when some big local producers have cut back production.
Toyota Motor Corp. is the only automaker among Japan's top five yet to report preliminary or actual results. Its announcement is due May 8.
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