Honda Motor Co. (HMC) revealed that it plans to extend its production suspension in Japan to March 27 from March 23 due to difficulties in securing parts from suppliers on the back of earthquake and tsunami on March 11 that killed about 10,000 people and damaged infrastructure.
Soon after the earthquake, Honda ceased production at six plants in Japan. This apart, the company shuttered a research and development center in Tochigi on the death of one of its employees. Last week, the automaker revealed that it may suspend up to half of its workforce at its manufacturing facility in the Mexico’s Jalisco state due to low auto parts inventories.
Honda also decided to suspend orders for May from U.S. for vehicles manufactured in Japan. Its 80% vehicles that are sold in the U.S. are built in North America. However, the automaker exclusively manufactures its fuel-efficient lineups, Fit, Insight hybrid, Civic hybrid, CR-Z hybrid and Acura RL and TSX in Japan.
Other Japanese automakers, including Toyota Motor Corp. (TM) and Nissan Motor Co. (NSANY), are also plagued by the natural disaster in the country. Toyota, which has suspended production at its 12 wholly owned as well as its other partly owned plants, has started producing auto parts at 7 domestic plants last Thursday. Meanwhile, Nissan, which has suspended production until March 20, plans to restart its operations, although at less than full capacity.
Honda, a Zacks #3 Rank (Hold) stock, posted a 40% decline in profit, reaching ¥81.12 billion ($995 million) or ¥45.01 (55 cents) per share in the third quarter of its fiscal 2011 from ¥134.63 billion or ¥74.19 per share in the same quarter of prior fiscal year. The fall in profit was attributable to decrease in automobile unit sales in all the regions, except North America.
Consolidated net sales and other operating revenues in the quarter slipped 6% to ¥2.11 trillion ($25.90 billion) on the back of unfavorable currency translation and lower automobile sales in Japan, despite increased revenues from the motorcycle business in the Asian countries. At constant exchange rates, Honda’s revenues decreased 0.8%.
Consolidated operating profit ebbed 29% to ¥125.65 billion ($1.54 billion) from ¥176.97 billion. This was attributable to increased selling, general and administrative (SG&A) and research and development expenditures as well as unfavorable foreign currency exchange movements that more than offset the positive impact from better model mix and ongoing cost reduction measures.
The company has lowered its revenues guidance for the full fiscal 2011 based on lower outlook for unit sales in all the segments. However, the company has upgraded the outlook for operating profit, profit and earnings per share.
For the full fiscal year 2011 ending March 31, 2011, Honda projected a 3.7% increase in revenues to ¥8.9 trillion compared with the earlier projection of a 4.9% increase in net sales and other operating revenues to ¥9 trillion ($108.59 billion).
HONDA MOTOR (HMC): Free Stock Analysis Report
NISSAN ADR (NSANY): Free Stock Analysis Report
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
Zacks Investment Research
