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EMERGING PROFITS FROM EMERGING MARKETS

Blasting its new fiscal year off the line, Honda produced excellent first-quarter results. However, the small print pointed to Asia and other emerging markets as largely responsible for this success. BDN financial editor Roger Willis reports.

Honda’s global motorcycle business revenue in the three months to June put on an impressive 30.5% to £4.18bn. Associated operating profit grew by 21.3% to £605m – but operating margin fell to 14.5% from 15.6%. Total sales volume during the period was 9.6% up to 4.251m powered two-wheelers.

Asian sales led the charge, rising by 10.5% to 3.585m. And at the heart of this advance was an extraordinary performance in India, the world’s largest PTW market. Sales by Honda’s wholly-owned Indian subsidiary HMSI more than doubled, 102.6% up to 995,000.

The company admitted some big countries in Asia were impacted harder by ongoing semiconductor supply shortages. Shipments from Indonesian joint-venture affiliate Astra Honda dropped by 22.1% to 684,000, Vietnam was 9.9% down to 532,000 and Thailand lost a more marginal 0.7% at 334,000.

The headcount across other emerging regions, with Latin America to the fore, rose by 14.5% to 419,000. Sales based on bikes from Honda’s Manaus manufacturing hub in Brazil increased by 9.4% to 275,000.

Developed-world figures were less satisfactory. European sales declined by 25% to 81,000. Honda’s Japanese domestic sales shrank by 5.1% to 56,000. But North America added 8.9% to 110,000.

However, Honda is maintaining forecasts despite the microchip famine, and says it will strive to exceed them by utilising alternative parts and deleting certain models.

Currently, for the full year to March 2023, total sales volume is predicted to grow by 9% to 18.56m. Asia should be 9.2% higher at 15.93m and other emerging markets 9% better off on 1.57m. Europe is projected to finish 12% up to 355,000. North America will more-or-less hold station on 440,000. Japan is set to put on 8.6% to 265,000.

In sharp contrast to all this qualified optimism, Honda’s Q1 car business results were even more dire than usual. Although its monumental automotive turnover rose by 3.4% to £14.417bn, associated operating profit plunged – 45.9% down to a mere £237m. Operating margin deteriorated from an already poor 3.1% to just 1.6%.

Yen-sterling currency translation at forex rates applicable on 10 August.    

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