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Honda Motor Co. (NYSE:HMC) has posted a profit of ¥72.1 billion ($776 million) for the fourth quarter of its fiscal year ended March 31, 2010, an impressive increase of 140% from the same period in 2009. This was equivalent to earnings per share of ¥39.78 (43 cents), an increase of ¥138.95 ($1.50) from a loss of ¥99.17 ($1.07) for the corresponding period last year.

Consolidated net sales and other operating revenue in the quarter rose 27.8% to ¥2.3 trillion ($24.5 billion). This was attributable to favorable currency translation effects and increased sales in the automobile business. At constant exchange rates, Honda’s revenue would have increased 25.4%.

Consolidated operating income increased ¥368.2 billion ($3.96 billion) to ¥96 billion ($1.03 billion). This was attributable to increased profits on the back of increased revenue, reduction in vehicle costs and a decline in selling, general and administrative (SG&A) expenditures.

Segment Performance

The Honda Automobile segment sales went up 28.5% to 874,000 units. In Japan, sales increased 29.8% to 183,000 units due to favorable sales of Fit and Step WGN models. Outside of Japan, sales rose 28.2% to 691,000 units due to improved sales in North America and Asia (especially in China). Revenue from sales to external customers advanced 32.3% to ¥1.72 trillion ($18.5 billion) due to increased unit sales and favorable currency translation effects. Operating income shot up to ¥24 billion ($258 million) from a loss of ¥275.4 billion ($2.96 billion) in the same period last year, due to higher revenues and lower SG&A expenses.

The Honda Motorcycle segment sales rose 30% to 2.6 million units. In Japan, sales increased 15.7% to 59,000 units and 30.3% to 2.5 million units outside of Japan. Revenue from sales to external customers escalated 22.1% to ¥335.1 billion ($3.6 billion) due to improved unit sales and favorable currency translation effects. Operating income jumped to ¥28 billion ($301 million) from a loss of ¥2.8 billion ($30 million) a year ago.

Revenue from sales to external customers in the Financial Services segment grew 6.8% to ¥144.3 billion ($1.6 billion) from the same period in 2009. Operating income increased 161.1% to ¥47.2 billion ($508 million) from the same period in 2009, due to decreased allowance for losses on credit and lease residual values.

The Honda Power Product and Other segment sales went up 6.5% to 1.6 million units. In Japan, sales rose marginally by 1% to 102,000 units. Outside Japan, sales increased 6.9% to 1.5 million units, driven by improved sales in Asia and other regions including Australia and Africa.

Revenue from sales to external customers in the segment grew 8.2% to ¥78.6 billion ($845 million) from the same period last year due to higher unit sales of power products and favorable currency translation effects. The segment witnessed an operating loss of ¥3.1 billion ($34 million) in the quarter. However, this is an improvement from the loss of ¥11.9 billion in the same period last year due to decreased SG&A expenses.

Annual Results

Honda has reported a 95.9% increase in profit to ¥268.4 billion ($2.9 billion) for fiscal year 2010. However, the company missed the Zacks Consensus Estimate of a profit of $1.74 per share by posting earnings per share of ¥147.91 ($1.59) for the fiscal year.

Consolidated revenue dipped 14.3% to ¥8.6 trillion ($92.2 billion) due to unfavorable currency translation effects and lower revenues in the automobile business. At constant exchange rates, revenues would have decreased by 7.5%.

Consolidated operating income for the period rose to ¥363.7 billion ($3.9 billion) from ¥189.6 billion ($2 billion) on the back of lower SG&A and R&D expenses and continued cost reduction actions.

Financial Position

Consolidated cash and cash equivalents as of March 31, 2010 increased ¥429.5 billion ($4.6 billion) from March 31, 2009 to ¥1.1 trillion ($12 billion). Long-term debt amounted to ¥3 trillion ($32.7 billion) as of that date. The long-term debt to capitalization remained flat at 41% compared to 42% in the fourth quarter of the prior fiscal year.

In fiscal 2010, net cash flow from operating activities increased to ¥1.5 trillion ($16.6 billion) from ¥384 billion ($4.1 billion), driven by an improvement in profit and a decline in inventories. Meanwhile, capital expenditures reduced to ¥392 billion ($4.2 billion) from ¥635 billion ($6.8 billion) a year-ago.

Guidance

For the first half of fiscal year 2011 ending September 30, 2010, Honda projected a 14.8% rise in net sales and other operating revenues to ¥4.66 trillion ($50 billion). The profit is expected to rise 216.6% to ¥195 billion ($2 billion). This is equivalent to earnings per share of ¥107.46 ($1.16).

For the full fiscal year 2011 ending March 31, 2011, Honda projected an 8.9% increase in net sales and other operating revenues to ¥9.34 trillion ($101 billion). Unit sales are expected to rise 223,000 vehicles to 3.6 million in the Automobile segment; 736,000 motorcycles to 10.4 million in the Motorcycle segment; and 126,000 components to 4.9 million in the Power Product and Other segment.

The profit is expected to grow 26.7% to ¥340 billion ($3.7 billion). This is equivalent to earnings per share of ¥187.37 ($2.02).

Source: Honda: Sales Spike, Profits Surge

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