TOKYO – Profit tumbled 40 percent at Honda Motor Co. in the most recent quarter on a deteriorating sales mix, rising incentives and foreign exchange losses.
Operating profit dropped to 170.1 billion yen ($1.54 billion) in the fiscal third quarter ended Dec. 31, Honda said on Friday.
Net income plunged 71 percent to 168.2 billion yen ($1.53 billion) in the October-December period. Revenue advanced 0.4 percent to 3.97 trillion yen ($36.01 billion), as worldwide sales increased 4.8 percent to 1.41 million vehicles in the three-month period.
Results retreated on narrowing margins as customers rush away from the sedan segment where Honda is traditionally strong with the Civic and Accord sedans.
Increased sales expenses and warranty outlays also dented the bottom line.
Honda splashed out incentives to sell down the outgoing generation of the CR-V crossover, Executive Vice President Seiji Kuraishi said while outlining results. Honda said it also changed its accounting method for incentives which caused an on-paper increase.
Warranty costs climbed as the company recalled the CR-V to fix and engine problem.
The yen’s appreciation against the U.S. dollar and other currencies caused further pain. Exchange rates lopped 42.0 billion yen ($381.0 million) off quarterly operating profit.
North America, traditionally one of Honda’s biggest profit centers, dragged on the company’s performance. North American regional operating profit fell 53 percent to 50.0 billion yen ($453.6 million) in the quarter, despite a 1.4 percent increase in sales to 498,000 units.
North American results were hit partly because of crimped supply from Mexico.
Honda suspended operations at its Celaya assembly plant in June, when it was inundated with water released from nearby dam that had filled to dangerous levels by torrential rain. Honda resumed partial production at Celaya last October, but the factory didn’t reach full production until mid-November. Honda said at the time it expected sales to decline about 75,000 units.
European sales dipped 1,000 units to 41,000 in the three months as regional operating profit dropped 49 percent to 1.31 billion yen ($11.9 million) from a year earlier.
Honda kept its global outlook mostly unchanged for the current fiscal year ending March 31, 2019. Honda predicts operating profit will fall 5.2 percent to 790.0 billion yen ($7.17 billion).
But the carmaker slightly raised its net income forecast. Honda now predicts net to fall 34 percent to 695.0 billion yen ($6.30 billion). It had earlier expected a steeper 36 percent slide to 675.0 billion yen ($6.12 billion). Honda said more cooperative foreign exchange rates will help.
Honda kept its full-year global sales outlook steady. Sales are still seen expanding 1.7 percent to 5.29 million vehicles in the current fiscal year ending March 31, 2019.
Naoto Okamura contributed to this report.