TOKYO – Operating profit at Honda soared in the most recent quarter, bouncing backing into the black and adding nearly $2 billion in three months as sales rebounded, China business boomed and some operational headaches slipped into the rearview mirror.
Honda booked an operating profit of 213.2 billion yen ($1.93 billion) in the fiscal fourth quarter ended March 31, reversing an operating loss of 5.6 billion yen ($50.8 million) the year before, the automaker said Friday.
At the net level, Honda also restored profitability, posting net income of 213.3 billion yen ($1.94 billion), compared to a net loss of 29.5 billion yen ($267.7 million) from a year earlier.
Revenue advanced 4.8 percent to 3.62 trillion yen ($32.85 billion) in the January-March period. Global sales expanded 14 percent to 1.12 million vehicles. North American volume slid 10 percent to 382,000 units in the quarter, but surging deliveries in China offset the retreat and powered a 70 percent jump in Asian sales to 506,000 vehicles in the period.
Cost control and rising sales helped underpin the quarterly improvement, Honda said. So did a reduction in loan loss provisions, which were drawn down as the economy recovered.
Regarding the global semiconductor shortage, Honda said it lost about 100,000 vehicles of output in the just-ended fiscal year. It expects to lose more production due to the supply crunch in the April-September period, but recoup that reduction starting from the autumn.
The strong fourth fiscal quarter finish helped Honda’s full fiscal year results exceed pre-pandemic levels. Full-year operating profit grew 4.2 percent to 660.2 billion yen ($5.99 billion) in the business year ended March 31. Net income ballooned 44 percent to 657.4 billion yen ($5.97 billion). Global sales, however, dipped 5.1 percent to 4.55 million vehicles.
Looking ahead, Honda expects sales momentum to pick up in the current fiscal year ending March 31, 2022. It sees worldwide volume adding 10 percent to 5 million vehicles, driven party by rebounding light truck sales in the U.S. and the debut of the redesigned Civic.
Honda sees North American sales increasing 15 percent to 1.7 million vehicles this fiscal year.
Record R&D spending
Despite the robust sales outlook, Honda expects profits to mostly flatline. Operating income, for instance, will barely budge as rising costs and R&D expenses offset the sales boom.
Senior Managing Director Kohei Takeuchi noted Honda will spend a record 840 billion yen ($7.62 billion) on R&D in the current fiscal fiscal year. The spending surge will partly fund Honda’s recently unveiled bid to completely phase out internal combustion engines from its global lineup by 2040. By then, Honda says all its new-car sales will be pure electrics or fuel cell vehicles.
“It is the highest on record,” Takeuchi said of the R&D outlays. “But this is because the existing internal combustion engine is going to shift toward electrification, and we need the money.”