Japanese second largest automaker, Honda Motor, announced on Wednesday (August 5th) its first quarterly profit growth in six quarters and raised its annual performance expectations.
This was thanks to the weakening of the Japanese yen and the elimination of the US tariff-related costs that dragged down profits in the same period last year.
Based on adjusted exchange rate assumptions, Honda Motor raised its annual operating profit outlook by 30%, from 500 billion yen (about $4.1 billion) to 650 billion yen. The company also raised its net profit and revenue expectations.
Operating profit for the April-June quarter more than doubled compared to the same period last year, rising from 244.2 billion yen to 530.8 billion yen, far exceeding the median estimate of 302.1 billion yen from a survey of nine analysts by the London Stock Exchange Group.
Honda expects the average exchange rate for the fiscal year against the US dollar to be 155, up from the previous forecast of 145.
Earlier, Honda suffered its first annual loss in decades. In May, the troubled automaker announced its first annual loss in nearly 70 years, due to over $9 billion in costs from restructuring its electric vehicle business.
Honda stated that no costs related to the restructuring were included in the first quarter, and negotiations with suppliers affected by the restructuring, many of which are located in North America, are still ongoing.
The company said it expects additional restructuring costs of 520 billion yen for the fiscal year, higher than the previous forecast of 500 billion yen.
Honda CEO Toshihiro Mibe apologized for Honda’s performance at the company’s annual shareholder meeting in June but received support and was reappointed to the board of directors.
The company had previously announced that its global vehicle sales for the first quarter dropped by 4% to 838,000 units.
Due to a sharp drop in sales in the Chinese market by nearly 50%, coupled with declining sales in other Asian regions, global sales were down overall. Higher oil prices have led more consumers to choose electric vehicles, offsetting sales growth in the US and Japanese markets. In this quarter, the US market accounted for about half of Honda’s total sales.
Honda CFO Masao Kawaguchi told reporters that rising fuel prices in North America have increased demand for their fuel-efficient hybrid and gasoline-powered models.
(This article is based on a report from Reuters)