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A Honda Odyssey car is displayed outside Honda Motor Co's showroom in Tokyo Jan. 31, 2013. Honda Motor Co. Ltd. trimmed its annual net profit forecast by 1.3 per cent after car sales have been knocked in China, and as it continues to struggle in Europe.


Honda Motor Co. Ltd. has trimmed its annual net profit forecast by 1.3 per cent to ¥370-billion ($4-billion U.S.) on poorer than expected car sales in China and Europe, even as it sees strong sales in the United States, its biggest market.

Japan's third-biggest auto maker said its net profit for Oct.-Dec. was ¥77.4-billion, compared with the ¥47.7-billion booked last year when it suffered from disrupted supply chains after floods hit it and its suppliers' factories in Thailand.

The third quarter result was below the average estimate of ¥111.4-billion among seven analysts polled by Thomson Reuters I/B/E/S.

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"The market had expected the company to release a bright outlook on the back of a weakening yen," said Yoshihiro Okumura, an analyst at Chibagin Asset Management.

"It was negative that the company did not raise its full-year outlook. Now, investors will be watching how the car maker will try to raise sales in the core U.S. market this year."

Honda, which relies on the U.S. for 40 per cent of its global sales, maintained its North American car sales forecast for the year to March. For rivals Toyota Motor Corp. and Nissan Motor Co. Ltd., the U.S. accounts for about a quarter of global auto sales.

In calendar year 2012 the U.S. auto market posted its strongest sales figures since 2007 at 14.5 million vehicles, and the momentum is likely to continue into January.

Honda cut its global car sales forecast to 4.06 million vehicles from 4.12 million, and its European car sales outlook to 185,000 vehicles from 205,000.

In China, Honda sold 604,000 vehicles in 2012, lower than the initial goal of 750,000 it set before sales started falling in September. The financial year in China ended in December.

Japanese brands in China suffered from an outbreak of anti-Japan sentiment in late 2012 after the two countries became embroiled in a diplomatic dispute over islands both claim as their own. The pace of recovery in China is slower than Honda had expected, executive vice-president Tetsuo Iwamura said.

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In the final quarter and the next business year, Japanese car makers will be helped by the yen's recent weakening against the dollar, as they can convert overseas profits back to the yen at a more favourable rate and export cars more cheaply.

The Japanese currency is trading around 91 to the dollar, well down from 78 at the start of the October-December quarter.

Honda changed its average dollar rate assumption to ¥81 from ¥80 for the financial year that ends in March. For the fourth quarter, its dollar rate assumption is ¥85, executives said.

"Since the yen is trading at around 90 yen at the moment, it may be the case that 85 yen is conservative. But the currency moves at the end of 2012 were very sudden, and we do not know what will happen in February and March," chief financial officer Fumihiko Ike said.

Honda's operating profit will rise by about 16 billion yen for every one-yen hike in the value of the dollar, Mr. Ike said.

Honda is the first among major Japanese auto makers to announce its third quarter earnings. Toyota is set to announce on February 5, and Nissan on Feb. 8.

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The firm was optimistic about the coming business year.

"Next year, we will start to see full effects of the new models that have been introduced. Our full abilities are not reflected at the moment," Mr. Ike said.

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