Honda Motor Co.’s Earnings Increased 38%

Honda Motor Co’s. profit increased 38% in the most recent quarter as rising sales, a pension plan modification, and cost cutting counterbalance foreign exchange losses.

Operating profit expanded to $2.25 billion in the Japanese carmaker’s second-quarter finishing Sept. 30, from $1.63 billion a year prior.

Net income rose 39% to $1.75 billion in 3 months, Executive VP Seiji Kuraishi said on Oct. 30.

Revenue slid 9.9 percent to $32.18 billion. Global retail deals rose 6.3% to 2.43 million vehicles in the second quarter.

Honda’s operation profit rose with the help of cost cutting efforts, adding $545.96 million in three months.

Decreasing warranty outlays and other quality-related costs also boosted results by another $219.2 million.

The greatest increase came from a one-time gain of about $1 billion by Honda’s shift this year to a retirement age of 65 in Japan, from age 60 previously.

The extended work years saves Honda nearly $829.3 billion in the current quarter.

Currency Crunch

Those factors mixed with higher-margin vehicles, including crossovers and the newest, redesigned Civic, outweigh substantial losses from ever changing exchange rates.

Switching foreign exchange rates at Honda took $1.01 billion off the automaker’s quarterly profits, as currency in Japan rose in value compared to others, including the U.S. dollar.

The strength of the dollar hits hard in the US, which is usually Honda’s largest customer base and one of the company’s biggest production bases.

The US remains a profit center in the quarter. US regional operating profit rose 1.7% to $276.2 million, while sales increased 1.3% to 479,000 vehicles, from 473,000 in the same quarter a year prior.

However, operating profit in Honda’s European business fell 97% to $1.04 million from $31.0 million the year before.

European sales increased 7.1% to 45,000 vehicles, from 42,000 the year before.

But the largest profit drivers are still Asia and the home market of Japan.

Improved Forecast

Looking ahead, Honda increased profit outlooks for the current fiscal year ending March 31, 2017, even as the company lowered its revenue forecast.

The cost reductions, pension profit, and higher unit sales should help with profits.

Revenue is expected to drop 8.2% to $132.29 billion. It had expected earlier revenue to drop only to $135.75 billion.

However, operating profit is now advancing 29% to $6.42 billion, compared to a previous outlook for a 19% increase to $5.92 billion.

Still, Honda foresees net income raising 21% to $4.19 billion. Earlier, they saw net income rise 13% to $3.85 billion.

Honda also improved their worldwide sales outlook. It now expects global sales to go up 1.3% to 4.98 million cars, up from an earlier prediction of 4.92 million.

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