Honda Motor said today that its net profit for the three months ended December fell nearly 40% from a year ago as the yen's strength overshadowed cost-cutting efforts and as demand in Japan slowed.
The car maker posted a net profit of 81.1 billion yen ($995m) for the quarter, missing the average Nikkei forecast for a 93 billion yen net profit. Sales fell 5.8% to 2.1 trillion yen in the three-month period.
Honda said that if calculated at the same exchange rate as the corresponding period last year, net sales for the quarter would have decreased by approximately 0.8%.
For many Japanese firms, the yen's surge against the dollar and the euro has mitigated a post-financial crisis revival in demand and undermined the benefits of earlier cost cuts and restructuring.
More companies are considering moving production overseas to stay competitive against rivals benefiting from weaker currencies in their home countries.
Honda's operating profit slumped 29% to 125.6 billion yen. Honda said the fall was 'due primarily to the unfavourable currency translation effects and decreased sales in the automobile business in Japan'.
It warned that the economy of its domestic market was 'at a standstill', with the slow recovery of consumer spending and prolonged high unemployment still keeping demand at home weak.
Car demand eased in the period as government incentives to spur car buying expired. However, the company said it expected its full year net profit to hit 530 billion yen, up 97.5% year-on-year, an upward revision from 500 billion yen forecast in October.
The car maker said net profit for the nine months ended December was 489.5 billion yen, up 149.5% from the same time last year.
