A Much-Weaker Yen Against the Dollar Enables Fiscal Third-Quarter Profit Growth at Honda

Honda's fiscal 2023 third quarter had revenue grow 20.3% year over year on strong motorcycle growth and favorable currency translation with the average yen-to-dollar rate for the quarter at JPY 142 versus JPY 114 in the prior year's quarter. Operating income rose by 22.2% with operating margin up 10 basis points to 6.3%, which outperformed Toyota's 30 basis point margin contraction. We think Honda's margin growth versus Toyota's decline is from the latter firm likely being more generous on reimbursing suppliers for high material and commodity costs than Honda. The much-weaker yen versus the dollar enabled the quarter's operating income growth. The JPY 100.5 billion currency tailwind contained an JPY 83 billion contribution from the yen-to-dollar change alone, with the remaining contribution from the yen against various Asian currencies such as from India, Thailand, and Vietnam. We calculate that without the currency benefit, Honda's 22% operating growth would have changed to a 21.6% decline.