Honda reports 40 percent drop in profit

Honda Motor Co. on Monday reported a drop in quarterly profit because of the strong Japanese yen, but it raised its full-year profit forecast in anticipation of further growth in U.S. auto sales.

Honda, Japan's third-largest automaker, predicted net income for the fiscal year ending March 31 would nearly double to 530 billion yen, or $6.2 billion, from last year's weak levels.

But for the fiscal third quarter ended Dec. 31, Honda's income slid 40 percent to 81.1 billion yen, or $995 million, despite its cost-reduction efforts.

Honda said its research and development and administrative expenses rose, but it attributed the decline in earnings mainly to a rise in the yen to near-record levels. A stronger yen increases the cost of making vehicles in Japan and reduces the value of export earnings.

Since April 1, the start of the Japanese fiscal year, the yen has appreciated to trade at 87 to the dollar, on average, from 93 yen the previous year. For the full year, Honda estimates the exchange rate will average 85 yen to the dollar.

The automaker said the yen's rise wiped 45 billion yen, or $550 million, off of its third-quarter operating profit, which was down 29 percent at 126 billion yen, or $1.5 billion.