Rosy revenues, cloudy outlook: Honda’s quarterlies set the scene for Japanese peers

Today at Aoyama Itchome

Today at Aoyama Itchome

Honda usually is first among Japan’s Big Three automakers to announce quarterly results, and today was no exception to the rule. Honda’s story, told in the ascetical 2nd floor meeting room at Honda HQ in Tokyo, sets the scene for what will play out in the coming days at Toyota, Nissan, and to some degree at Japan’s smaller players: Profits way up due to lower yen, sales up due to the U.S., but held back in China and Southeast Asia, prognosis guarded.

Honda Executive VP Tetsuo Iwamura and Operating Officer Kohei Takeuchi disclosed net profits of 160.7 billion yen ($1.56 billion) for the October-December 2013 quarter, more than doubling the 77.4 billion yen from the same period in the year prior. Consolidated operating income for the quarter rose 73.2 percent to 228.5 billion yen ($2.23 billion). However, greedy analysts expected even more, and will most likely flog the stock when it opens on Monday.

The bulk of Honda’s bigger profit is the result of currency effects. The yen lost a good deal of its exaggerated value and came back to more realistic levels. Foreign currency buys more yen, foreign profits increase in value once they hit Japanese books. A surging U.S. market, where Honda is selling the bulk of its cars, and increased sales from new models all add to this effect. Like its Japanese peers, Honda is held back in China, where they all suffer from the island issue – but not as much as they used to a year ago. A new trouble spot is Thailand, which finds itself in political turmoil – again. This on top of an overall market that had dropped 7.7 percent last year. The Land of (frozen) Smiles is likewise expected to feature negatively in the reports by Toyota and Nissan.

“We were envisioning strong growth in India, Indonesia and Thailand to date,” Iwamura told Yoko Kubota of Reuters after the meeting, while I packed up due to a lack of Nihongo, “but we need to be a little bit more cautious.”

The “challenging market conditions mainly in emerging countries” prompted Honda to leave its previous financial forecast unchanged, and to cut its global car sales forecast for the current fiscal slightly from 4.43 million units to 4.385 million.

The allegedly continuously cheaper Japanese yen did its part to advise caution.  The Japanese currency stopped getting cheaper in late December . In the last week, its value increased more than 2 percent against the dollar. This not because of currency manipulation shenanigans, at least not in Tokyo. The Fed’s decision to put a break on quantitative easing caused third world currencies to tumble and investors to seek the safety of harder currencies, such as the yen.

Toyota will report on February 4, to be followed by Nissan on February 10, with the Daily Kanban in attendance.