Honda Motor delivered impressive quarterly results for the April-June period, posting its first quarterly profit rise in six quarters. According to reports from Reuters, the company's consolidated operating profit more than doubled to ₹4,270 crore ($3.4 billion yen) in the April-June quarter from ₹2,040 crore ($2.4 billion yen) a year earlier. This performance significantly exceeded analyst expectations, coming in well above the ₹2,900 crore median estimate from nine analysts polled by LSEG. The results were aided by a weaker yen and the absence of US tariff-related costs that had weighed on earnings a year earlier. As reported by BigGo Finance, net profit attributable to owners was 2.3 times higher than the same period last year at ₹3,700 crore ($2.9 billion), marking a record high for the April-June quarter. Chief Financial Officer Masao Kawaguchi described the results as "extremely strong, exceeding our expectations," expressing confidence in the earnings recovery.
Building on the strong quarterly performance, Honda has significantly raised its full-year forecasts across key metrics. As reported by Reuters, the company lifted its full-year operating profit forecast by 30% to ₹5,100 crore ($4.1 billion yen) from the previous ₹4,160 crore ($3.2 billion yen). The automaker also raised its net profit outlook to ₹3,700 crore ($2.5 billion) for the fiscal year ending March 2027, representing a V-shaped recovery from the previous year's loss of ₹3,700 crore ($2.7 billion). The company assumed the yen will trade at an average rate of 155 per dollar this fiscal year, compared to 145 expected previously. Full-year sales revenue is projected to increase 11% year-on-year to ₹24.15 trillion ($153.3 billion), a ₹1 trillion upward revision from the previous forecast. This exceeds the market consensus average, with the QUICK Consensus forecasting a net profit of ₹3,920 crore ($2.5 billion).
The improved financial performance was primarily attributed to favorable market conditions and reduced cost pressures, with currency movements playing a crucial role. According to Reuters, the results were aided by a weaker yen and the absence of US tariff-related costs that had weighed on earnings a year earlier. As reported by BigGo Finance, Honda's earnings structure is such that a one-yen depreciation against the dollar boosts operating profit by ₹10-12 billion ($63.5-76.2 million). During the April-June quarter, the average exchange rate hovered in the high 150-yen range against the dollar, significantly weaker than the company's assumed rate of 145 yen. The company also benefited from currency gains that offset weaker vehicle sales and higher material costs linked to the Iran war. However, this currency-driven performance comes with risks, as Honda has effectively tied more of its profit target to the USD-JPY exchange rate path. If the yen rebounds toward 145, the translation benefit that helped justify the ₹5,100 crore operating profit forecast would shrink, even if Honda sold the same number of cars.
Despite the strong quarterly results, Honda continues to navigate an expensive overhaul while maintaining its strategic focus on hybrid vehicles. The company flagged higher expected restructuring costs for this fiscal year even as it reported none in the latest quarter, with negotiations with suppliers affected by the overhaul still ongoing. The strong performance was primarily driven by expanding hybrid vehicle sales in Honda's key North American market and favorable currency tailwinds. Against a backdrop of rising gasoline prices due to escalating tensions in the Middle East, demand for fuel-efficient hybrids surged, particularly in North America. As reported by BigGo Finance, Honda's earnings are structured such that the weak yen and strong sales of hybrid vehicles leveraging its internal combustion engine technology are absorbing the increased costs associated with EV investments. The company's flexibility in product portfolio is underpinning its earnings amid a temporary slowdown in the global shift toward EVs, with expanding motorcycle sales in Asia also contributing to profits as an affordable transportation option.
