Honda gets big tax-cut windfall
TOKYO — Honda Motor Co. rode U.S. corporate tax cuts to the bank in the most recent quarter, as net income more than tripled.
The giant tax windfall, to the tune of more than $3 billion, also spurred Honda to lift its full-year profit forecast. The automaker now expects net income to soar 62 percent in the fiscal year ending March 31, as opposed to the 5.1 percent decline it had been bracing for.
|Results for the quarter ended Dec. 31|
|Operating profit||$2.53 billion||37%|
|Net income||$5.06 billion||238%|
The U.S. tax breaks, which reduced the corporate rate to 21 percent from 33 percent, took effect Jan. 1. But Honda booked the impact of a revaluation of deferred tax assets and liabilities on its U.S. operations in the company's fiscal third quarter ended Dec. 31.
"That has had a huge impact," Senior Managing Director Kohei Takeuchi said. "As for other items in this law, we will examine them and reflect any impact in our outlook for next fiscal period."
Net income surged to ¥570.2 billion ($5.06 billion) in the October-December quarter, from $1.5 billion a year earlier, bolstered by a $3.07 billion tax-cut bonanza.
Even excluding the tax break, Honda's results were robust. Booming business in mainland Asia and North America helped power the profit increase, while foreign exchange rates lifted revenue as well.
Operating profit climbed 37 percent to $2.53 billion in the quarter, buoyed by an improved sales mix and favorable foreign exchange rate gains. Revenue rose 13 percent to $35.15 billion, as global retail sales increased 2.4 percent to 1.3 million vehicles.
Asia remained Honda's biggest and most profitable market. Honda's regional operating profit in Asia surged 35 percent, while sales increased 9.7 percent to 578,000 vehicles.
North American regional operating profit expanded 27 percent to $941 million, even as sales declined 3.7 percent to 491,000 vehicles.
Honda's North American sales will slow with the declining U.S. market, the company predicted.
"I think the market has entered the adjustment stage," Executive Vice President Seiji Kuraishi said. In January, U.S. sales of the normally robust CR-V crossover and the recently redesigned Accord sedan slid below year-earlier levels, indicating increased pricing pressure in the market, he added.
"We have held our incentives low. I think that has impacted the Accord sales," Kuraishi said.
Naoto Okamura contributed to this report.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.