TOKYO – Honda reported a 33 percent drop in operating profit in the latest quarter as outlays for a U.S. class action lawsuit over defective Takata airbags undercut rising sales.
Operating profit fell by a third to 152.9 billion yen ($1.36 billion) in the company’s fiscal second quarter ended Sept. 30, from 228.0 billion yen ($2.03 billion) a year earlier.
Net income declined 1.7 percent to 174.0 billion yen ($1.55 billion) in the three months, the company said Wednesday while announcing fiscal second quarter financial results.
Revenue advanced 15.7 percent to 3.78 trillion yen ($33.59 billion) in the latest quarter, as global retail sales increased 6.1 percent to 1.29 million vehicles, Japan’s No. 3 carmaker said.
Operating profit was hit by a 53.7 billion yen ($477.2 million) charge to a settle class action lawsuit in the U.S. brought by customers of cars with defective Takata airbag inflators.
Operating profit also declined from a year earlier, when results were buttressed by a one-time gain from a change in the company’s pension system to extend workers’ retirement age.
Surging sales in mainland Asia and Japan powered the worldwide volume increase, while positive foreign exchange rates helped lift revenue by an even wider margin.
But the increases weren’t enough to outweigh the hit from the U.S. settlement charge.
Operating profit in Asia, which includes the key China market, expanded 21 percent, while sales surged 18 percent to 570,000 vehicles in the quarter, making Asia Honda’s biggest market.
Operating profit in Japan slipped, even as sales rose 7.1 percent to 167,000 units.
North America, on the other hand, emerged as a weak link. The region slid to an operating loss of 660 million yen ($5.87 million) in the fiscal second quarter ended Sept. 30, hurt by the Takata airbag settlement. North American sales slid 5.6 percent to 452,000 vehicles.
European regional operating profit surged 24-fold to 2.5 billion yen ($22.2 million) as the region recovers, even as sales retreated 4.4 percent to 43,000 vehicles from the year before.
Nevertheless, Honda lifted for a second time its full-year earnings outlook for the current fiscal year ending March 31, 2018, citing gains from foreign currency rates and it motorcycle business.
Honda now predicts full-year global operating income will come in at 745.0 billion yen ($6.62 billion). The new target represents a decline of 11 percent from the year before.
Net income is now forecast to fall 5.1 percent to 585.0 billion yen ($5.20 billion), also a smaller decline than the 12 percent retreat Honda had forecast before.
Predicting slightly better-than-expected sales in Japan, Honda also lifted its global sales target by 5,000 vehicles in the current fiscal year. It now expects worldwide sales to inch ahead 0.1 percent to 3.69 million vehicles.
Naoto Okamura contributed to this report
