Consolidated operating income rose 12.8 per cent to 170.82 billion yen ($1.44 billion) from a year earlier — the low end of analysts’ forecasts which ranged from 172 billion to 207 billion yen — on a 10 per cent rise in sales to 1.937 trillion yen.
Net income climbed to a record 107.6 billion yen, or 110.42 per share, compared with 91.72 yen a year earlier.
The first quarter follows a record performance in the 12 months to March when both operating and net profits leapt by more than 50 per cent on strong sales and a slide in the yen from a year earlier.
The first business quarter — for which analysts estimated Honda’s average exchange rate to be between 125 to 130 yen to the dollar against 119 yen a year earlier — is, however, expected to be the only quarter to see benefits from a weaker yen this year.
A soft Japanese currency inflates the yen value of income earned abroad and makes exports more profitable.
Since April, the yen has surged 12 per cent, making life harder for Japan’s automakers and other big exporters. But even so Honda maintained its earnings forecasts for the current year and its average exchange rate assumption of 125 yen per dollar.
On Monday, the yen was trading at around 119.23 per dollar —nearly five per cent stronger than Honda expects for the year.
“The short-term currency fluctuation is bit worrisome, but we will wait and see for a while to decide whether we need to revise our exchange rate assumption,” Honda executive vice president Koichi Amemiya told a news conference.
Honda has forecast consolidated operating profit to rise 13 per cent to 720 billion yen and net profit to jump 27 per cent to 460 billion yen for the full year. The unfavourable exchange rate is expected to be offset by robust overseas sales — supported by the introduction of the remodelled Accord sedan, Honda’s flagship model in the United States, as well as popular light trucks such as the Oydssey minivan, the Acura MDX and Pilot sport utilities.
The company is also expected to benefit from two new models in Europe and strong motorcycle sales.
Honda also said it would buy back up to three million of its own shares, or up to 15 billion yen worth, between August 7 and October 25.
The buyback announcement followed a resolution at its annual shareholders’ meeting last month allowing it to buy back up to 20 million of its own shares or up to 100 billion yen worth.