Honda Reports Drop in Profit, Raises Forecast

Honda Motor Co., Japan’s third-largest automaker, had a smaller-than-expected drop in first-quarter profit and raised its full-year earnings forecast 4% as the company increased sales in the U.S. and Asia.

Net income fell 3% to 110.6 billion yen ($981 million) in the three months ended in June, including a 43.8-billion-yen charge for potential losses from derivatives trading to meet accounting rules, the Tokyo-based company said. Quarterly sales rose 9%.

President Takeo Fukui raised Honda’s profit forecast as the company gained market share in the U.S. from General Motors Corp. and sold more cars in China.

Honda, which gets about 64% of its operating profit from North America, predicted that the yen would be weaker this year than it originally forecast.

“Honda’s results look quite good,” said Koichiro Suzuki, who manages about $1.8 billion in Japanese equities at Sompo Japan Asset Management Co. in Tokyo.

“They are the direct beneficiaries of the yen’s weakness, and that sort of boost is a plus when things aren’t that easy.”

The company expects to earn 470 billion yen for the full year, compared with an earlier forecast of 450 billion yen. Honda expects the dollar to average 106 yen for the year. It had earlier forecast a rate of 105 yen to the dollar. The dollar traded at 112.20 yen Wednesday.

“Operating profit will be better because of a weaker yen,” said Satoshi Aoki, Honda’s executive vice president, at a news conference in Tokyo. “Net income will be helped by a bigger contribution from China and other affiliates.”