Honda logs 14% drop in quarterly operating profit in North America

Article by Andrew Christian, on October 30, 2014

Honda Motor Co. saw its operating profit in North America drop 14 percent to JPY38.92 billion ($355.7 million) in the fiscal second quarter ended September 2014, no thanks to declining sales and heavy discounting. With the drop, North America was Honda’s only major market that failed to post a gain in operating results.

In fact, Honda posted gains in both Japan and Asia, and even managed to cut its losses in Europe. According to Executive Vice President Tetsuo Iwamura, the operating profit drop in North America could be attributed to heavy incentives to sell more cars in the United States, especially to sell down the 2014 Accord.

While Honda posted a 33-percent surge in US sales for the Accord to 84,031 units, it was not enough to offset a 3-percent dive in sales in North America to 434,000 vehicles. The earnings drop in North America also affected Honda’s global operating profit, sending it down 4 percent to JPY164.44 billion ($1.5 billion) in the fiscal second quarter.

The carmaker logged a 2-percent surge in global sales in the quarter to 1.07 million vehicles, but posted a drop in Japan. It recorded a 4-percent jump in global revenues to JPY3.02 trillion ($27.55 billion) and an 18-percent rise in total net income to JPY141.9 billion ($1.3 billion).

With the results, Honda updated its full fiscal year global sales and net income forecasts to reflect a drop, blaming weakening sales outlooks in Japan and China.

For the fiscal year ending March 31, 2015, Honda is expecting to sell 4.6 million vehicles globally (up from 4.3 million posted in previous fiscal year) and log a 1.6-percent drop in net income JPY574.1 billion.

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