TOKYO -- Honda Motor Co. reported a slight rise in operating profit in the latest quarter as rising costs and foreign exchange losses weighed down gains from rising sales.
Operating profit edged ahead 0.9 percent to 269.21 billion yen ($2.40 billion) in the company’s fiscal first quarter ended June 30, up from 266.84 billion yen ($2.38 billion) a year earlier.
Net income increased 19 percent to 207.34 billion yen ($1.85 billion) in the three months, the company said Tuesday while announcing its first-quarter financial results.
Revenue advanced 7 percent to 3.71 trillion yen ($33.02 billion) in the latest quarter, as global retail sales increased 4.5 percent to 1.3 million vehicles, Japan’s No. 3 carmaker said.
Operating profit was buttressed by higher sales in Japan and mainland Asia that offset sliding volume in North America and Europe.
Honda also put behind it expenses related to an earthquake in Japan that depressed earnings a year earlier.
But increased marketing and other costs damped the gains, as did losses from unfavorable foreign exchange rates. Rising r&d investments also took a bite out of profits.
Tumbling sales of sedans undercut both volume and profits in the important North American market, as U.S. customers switched from passenger cars to light trucks, crossovers and SUVs.
“Passenger car sales are in a tough situation,” Executive Vice President Seiji Kuraishi said.
Honda tried to preempt the trend by dialing down production of its Accord midsize sedan to clear inventories ahead of the arrival of a full redesign of the nameplate this fall.
Nevertheless, Honda lifted its full-year earnings outlook for the current fiscal year ending March 31, 2018, citing expected gains from shifting foreign currency rates.
Honda now predicts full-year global operating income will come in at 725 billion yen ($6.45 billion). The new target represents a decline of 14 percent from the year before, but the decline is less than the 16 percent fall the company had originally forecast in April.
Net income is now forecast to fall 12 percent to 545 billion yen ($4.82 billion), also a smaller decline than the 14 percent retreat Honda had forecast before.
First-quarter results were driven by booming business in Asia, which is anchored by China, the world’s biggest auto market. Asia posted increases in regional operating profit and sales.
Operating profit in Asia expanded 8.3 percent to 97.83 billion yen ($870.8 million), while sales climbed 15 percent to 523,000 vehicles in the quarter, making Asia Honda’s biggest market.
North America, on the other hand, emerged as a weak link. Regional operating profit in North America dropped nearly 41 percent to 101.60 billion yen ($904.4 million) in the fiscal first quarter ended June 30. North American sales slid 5.7 percent to 481,000 vehicles.
European regional operating profit surged more than fivefold to 6.65 billion yen ($59.2 million), even as sales there dipped to 42,000 units from 45,000 the year before.
Naoto Okamura contributed to this report