Honda’s operating profit records at $2.69 billion in Q1 FY2018-19, highest in more than a decade

The promising results and earnings outlook from Japan’s No. 3 automaker Honda Motor stands in stark in contrast to the bearish forecasts from several other automakers hurt by rising raw material costs due to additional US metal tariffs and possible higher duties on imported vehicles.

Resisting the impact of US aluminium and steel tariffs, Honda could record a surprising jump in quarterly profits to their highest in more than a decade. The improvement in North American sales could be attributed to this positive result. About 7.7 per cent sales grew in North America and 3 per cent grew across the globe in Q1 FY2018-19 that drove Honda’s operating profit to US$ 2.69 billion, highest since early 2006.

Honda Senior Managing Director Kohei Takeuchi said at an earnings briefing on Tuesday, July 31, “Roughly 90 percent of our steel and aluminium needs in the United States are procured locally.” “Overall we’re not seeing a big impact (from tariffs) so far.”

Honda’s US sales increased after it shifted its focus from mainstay Civic and Accord sedans and raised output of SUVs including Pilot model.

In Asia, Honda’s sales stood a bit lower over the quarter, which is why the company decided to stick to its 2.2 annual sales target. The automaker faced a slump in sales in China because of some quality issue with its popular models.

As far as the annual operating profit is concerned, the company forecasts less than a previously expected drop but does not expect a surge in global vehicle sales given the production cut by 75,000 units in Mexico.

It sees annual operating profit at 710 billion yen, 15 per cent down from a year ago and expects to sell 5.29 million vehicles globally in the rest of the financial year ended on March 31, 2019, still a record high but below the previous estimate for 5.38 million units.

The automaker also reported that it had not made any decisions yet on its operational strategy in case the United States possible tariffs on imported vehicles come into effect.

In May, the US launched an investigation into whether imported vehicles pose a threat to national security or not and if necessary, it may impose tariffs up to 25 per cent on imported vehicles.