Editor's note: An earlier version of this story slightly understated Honda's revenue for the year.
TOKYO – Honda Motor Co. reported a 13 percent decline in full-year operating profit on foreign exchange losses, rising incentives and one-time costs to restructure its European business.
Operating profit declined to 726.3 billion yen ($6.55 billion) in the fiscal year ended March 31, the Japanese carmaker said Wednesday.
Net income tumbled 42 percent to 610.3 billion yen ($5.51 billion) in the 12-month period.
Revenue advanced 3.4 percent to 15.89 trillion yen ($143.4 billion), as worldwide sales increased 2.5 percent to 5.3 million vehicles during the fiscal year.
Unfavorabale foreign exchange rates undercut earnings. The yen’s appreciation against the U.S. dollar and other currencies caused further pain.
Honda said exchange rates lopped 160.3 billion yen ($1.45 billion) off full fiscal year operating profit.
Honda booked another 68.0 billion-yen ($613.6-million) charge to rework its manufacturing footprint in Europe, where it plans to end output at plants in the United Kingdom and Turkey.
Rising selling expenses took another bite out of earnings.
In the January-March period alone, average incentive spending on Honda and Acura brand cars by American Honda Motor Co. increased 34 percent and was still about $1,310 below the industry average of $3,574 per vehicle, according to figures from Autodata Corp.
Average industry outlays for incentives declined 4.6 percent in the quarter.
The Honda brand’s incentives surged 47 percent in the January-March quarter, from a year earlier, to an average of $1,993 per vehicle. Average spending at Acura decreased 4.7 percent to $4,744, according to figures from Autodata Corp.
North America, traditionally one of Honda’s biggest profit centers, helped bolster earnings.
The region's operating profit increased 7.6 percent to 299.7 billion yen ($2.70 billion) during the 12-month period ending March 31, with sales rising 2.7 percent to 1.95 million units.
European sales declined 7.7 percent to 169,000 vehicles in the latest fiscal year as the region slumped to an operating loss of 6.6 billion yen ($59.6 million) from an operating profit of 15.8 billion yen ($142.6 million) a year earlier.
Honda predicted operating profit will increase 6.0 percent to 770.0 billion yen ($6.95 billion) in the current fiscal year ending March 31, 2020, while net income is forecast to increase 9.0 percent.
While the company's global sales are forecast to drop 3.1 percent to 5.16 million vehicles this fiscal year, Honda said a more profitable product mix will combine with cost reductions to boost results.
Honda predicted that North American sales will decline 4.0 percent to 1.88 million vehicles in the current fiscal year.