TOKYO -- Honda Motor Co.’s operating profit fell 22 percent in the latest quarter as expenses for recalling Takata airbags and losses from a strong dollar undercut rising sales.
Operating profit declined to 163.08 billion yen ($1.35 billion) in the Japanese carmaker’s fiscal third quarter ended Dec. 31, from 210.00 billion yen ($1.74 billion) a year earlier.
Net income slid 19 percent to 124.19 billion yen ($1.03 billion) in the three months, Executive Vice President Tetsuo Iwamura said while announcing financial results today.
Revenue climbed 3.4 percent to 3.62 trillion yen ($30.0 billion), as global retail sales rose 4.6 percent to 1.23 million vehicles.
Honda’s earnings took a hit from added expenses to address the ongoing recalls of Takata airbags. Honda and other automakers have had to call back millions of vehicles using potentially defective airbag inflators that can explode with too much force.
Honda booked 51.6 billion yen ($428.3 million) in quality-related expenses in the third quarter. The figure includes Takata recall costs, but Honda did not break out the amount.
Foreign exchange rates lopped another 19.1 billion yen ($158.5 million) off Honda’s quarterly operating profit. While it logged gains from the yen’s decline against the dollar, those were offset by the dollar’s increase against currencies in Canada, Mexico and Brazil.
The dollar’s strength hit particularly hard in North America, which is traditionally Honda’s biggest market and one of the company’s biggest production bases.
North America and Japan were weak points in the quarter. North American sales declined 1.7 percent to 466,000 units, while Japan volume fell 6.8 percent to 151,000.
But sales increases in Asia and Europe pushed the overall global total higher.
European sales rose 19 percent to 43,000 vehicles. Sales in Asia, which includes China, climbed 17 percent to 503,000 vehicles in the quarter.
Looking ahead, Honda lowered its revenue target for the current fiscal year ending March 31, 2016. Honda now expects revenue of 14.55 trillion yen ($120.76 billion), compared with an earlier outlook of 14.60 trillion yen ($121.17 billion). Honda lifted its full year sales forecast to 4.735 million vehicles, from an initial goal of 4.73 million.
Honda forecasts operating profit to increase 2.1 percent to 685.0 billion yen ($5.69 billion) this fiscal year and net income to advance 3.1 percent to 525.0 billion yen ($4.36 billion).