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Honda Raises Guidance After Operating Profit Jumps 67%

By John Rosevear - Feb 9, 2021 at 11:04AM

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Good results in China and Japan led Honda to boost its forecast.

Honda Motor (HMC 1.59%) raised its guidance for the fiscal year after its operating profit in the quarter that ended on Dec. 31 jumped 67% from a year ago to 277.7 billion yen ($2.65 billion).

Honda said that despite the impact of COVID-19 and an ongoing global shortage of automotive semiconductors, it now expects an operating profit of 520 billion yen ($4.97 billion) for the fiscal year that will end on March 31, up from 420 billion yen in its earlier forecast.

Honda also boosted its dividend.

Key points from Honda's quarterly earnings report

  • Honda's 67% increase in operating profit was driven by improved sales and model mix, and also by cost reductions, including, Honda said, "increased efficiency of R&D [research and development] expenditures." 
  • Global sales of Honda automobiles (including trucks and SUVs) rose 10.7% from a year ago, to about 1.38 million vehicles sold. Strong sales in China and Japan helped to offset a 9% year-over-year decline in the U.S. 
  • Sales of Honda's motorcycles fell 14.9% in the fourth quarter, as weak results in the Asia-Pacific region were partially offset by good demand in India and Pakistan.
  • Sales in Honda's catchall "Life Creation" division, which includes everything from lawnmowers to private jets, rose 17.3% on good demand (for power products, mostly) in Europe and the U.S.
  • Operating profit in Honda's financial-services subsidiary rose 33% to 85.7 billion yen ($820 million) on good results in Japan and China.
A silver 2020 Honda CR-V, a compact crossover SUV.

Honda's compact CR-V was its best seller in the U.S. again in 2020. Image source: Honda Motor Co., Ltd.

About that dividend increase

Honda's dividend for the fiscal third quarter will be 26 yen ($0.25) per share, up from 19 yen per share last quarter and just 11 yen per share in the first quarter of the current fiscal year. 

The company now expects to pay total dividends of 82 yen per share for the full fiscal year. (Put another way, it expects that next quarter's dividend will also be 26 yen per share.) 

Looking ahead: Honda's increased guidance

Honda increased its profit guidance for the fiscal year that will end on March 31, and revised some of its sales forecasts. It now expects:

  • Operating profit of 520 billion yen, up from 420 billion in its November forecast. (Fiscal 2020 result: 633.6 billion yen.)
  • Sales of 15 million motorcycles, up from 14.8 million in the earlier forecast, on better-than-expected demand in India and Indonesia. (Fiscal 2020: 19.3 million.)
  • Sales of 4.5 million vehicles, versus 4.6 million in its earlier forecast. (Fiscal 2020: 4.79 million.) 
  • A full-year operating margin of 4%, versus 3.2% in the earlier forecast. (Fiscal 2020: 4.2%.)

The raw numbers

Like many Japanese companies, Honda uses a fiscal year that begins on April 1. The quarter that ended on Dec. 31, 2020, was the third quarter of Honda's 2021 fiscal year. 

Metric Q3 FY2021 YOY
Revenue 3.77 trillion yen 0.6%
Automobiles sold 1.38 million 10.7%
Operating profit 277.7 billion yen 66.7%
Operating profit margin 7.4% 3.0 PP higher
Net profit 284 billion yen 144%
Yen per U.S. dollar, average during period 104 5 fewer yen

Data source: Honda Motor Co., Ltd. Automobile sales are rounded to the nearest thousand. YOY = year over year. PP = percentage points.

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