Honda profit climbs 11% on North American sales, cost cutting







TOKYO – Honda Motor Co. reported an 11 percent increase in operating profit in the most recent quarter as rising sales in North America offset foreign exchange rate losses.

Operating profit climbed to 299.38 billion yen ($2.71 billion) in the fiscal first quarter ended June 30, the company said Tuesday in its quarterly earnings report.

Net income advanced 18 percent to 244.33 billion yen ($2.21 billion) in the April-June period.

Revenue increased 8.4 percent to 4.02 trillion yen ($36.32 billion), as worldwide sales expanded 3 percent to 1.3 million vehicles in the three-month period.

Robust sales in North America teamed with aggressive cost cutting to power Honda’s results.

Improved wholesale volume and mix lifted operating profit by 36.8 billion yen ($332.5 million), while cost cutting chipped in another 18.3 billion yen ($165.4 million). Those gains offset the Japanese yen’s appreciation against the U.S. dollar and other currencies.

Exchange rates lopped 25.6 billion yen ($231.3 million) off the quarterly operating profit.

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Group sales in North America, one of Honda’s traditional profit centers, climbed 7.7 percent to 518,000 vehicles in the quarter, while regional operating profit grew 8.6 percent to 110.36 billion yen ($997.2 million). In the key U.S. market, results were buoyed by the introductions in June of the redesigned Acura RDX crossover and Honda Insight hybrid sedan.

European sales were flat at 42,000 units in the three-month period, but Honda managed to boost regional operating profit 5.7 percent to 7.04 billion yen ($63.6 million).

Honda lowered its sales outlook for the current fiscal year ending March 31, 2019, but lifted its profit forecast citing more aggressive cost controls and better than expected exchange rates.

Global sales are now seen expanding to 1.5 percent to 3.7 million vehicles. Honda had originally forecast a 4.0 percent global increase to 3.8 million vehicles.

Honda blamed the downward revision on flooding in Mexico that forced Honda to temporarily shut down its Celaya assembly plant, a new factory the company opened in 2014.

That plant, which builds the Fit small car and HR-V compact crossover for the U.S., is expected to remain down until mid-November, the company said. The plant also makes engine parts for the Insight hybrid built at Honda’s plant in Indiana. Honda will also have to suspend Insight production for about a month starting in August because of a shortage of engine parts.

Honda said it will lose about 75,000 units of production from the flooding. Honda also trimmed its North American group sales forecast by 75,000 units to reflect the hit.

Honda now expects North American group sales to increase 2 percent to 1.94 million vehicles. It had originally forecast regional sales to rise 5.9 percent to 2.02 million units. The company will also book a 50 billion yen ($451.8 million) charge for lost sales and the cost of repairs.

Honda predicts operating profit will fall 14.8 percent to 710.0 billion yen ($6.42 billion) in the current fiscal year. It had earlier projected a decline fall to 700.0 billion yen ($6.33 billion).