Honda Motor Co., Japan's second-largest automaker by sales, on Friday reported a record net profit for the first quarter ended June, buoyed by strong demand in China. The record profit growth came as a positive surprise because many analysts had projected a double-digit decline in profits for Honda. The Japanese automaker, which is also the world's largest motorcycle maker, raised its first half to September forecasts to reflect the better-than-expected first-quarter results. But it kept its year to March net profit forecast, which projects an 18 percent drop in the bottom line. Honda lowered its year to March 2009 operating profit forecast, citing a bigger-than-expected rise in the cost of raw material and rare metals, and also trimmed its annual global car sales projection. First-quarter net profit rose to 179.61 billion yen ($1.7 billion) from 166.12 billion yen a year earlier. It was the first net profit rise in two quarters for the maker of Honda and Acura brand vehicles. “Strong profit growth of our affiliates, especially in China, contributed to the record net earnings as equity method gains reached 38.2 billion yen in the first quarter, the biggest income in any past quarter,” Honda executive vice president Koichi Kondo said at a press conference. A decline in sales promotion incentives in the United States, cost cuts and brisk sales of its vehicles also helped offset the adverse impact of a firmer yen and rising procurement cost of materials such as steel. “We could not book what provisions we had initially planned to set aside for sales incentives for accounting reasons, which inflated the profit level,” Kondo said. The company had initially earmarked about 30 billion yen in provisions for sales promotion incentives in the first quarter. Operating profit stood at 221.35 billion yen, nearly unchanged from 221.68 billion yen a year ago, even after a stronger yen subtracted 81.3 billion yen off the quarterly result.
