Honda on Friday said annual net profit jumped 79 percent on a reduction in expenses related to a historic airbag recall by its main supplier and robust vehicle sales in the US and China.
Honda said lower "quality-related expenses" contributed to its profit gain, hinting that the negative impact of a scandal at airbag supplier Takata was easing.
Takata's defective airbags have been linked to at least 16 deaths in the industry's biggest-ever safety recall and Honda was its biggest customer.
"Declines in quality control costs as the Takata airbag issue is in the process of being settled" contributed to Honda's profit recovery, Satoru Takada, an analyst at TIW, said before the earnings announcement.
Japan's number-three automaker said it scored net profit of 616.57 billion yen ($5.55 billion).
Worldwide the company said sales rose to a record of 5.028 million vehicles, with over 1.6 million units moved in the United States and more than 1.3 million in China.
Honda said headwinds from a stronger yen, which makes its domestically produced vehicles more expensive overseas, "was more than offset" by gains from new models, cost-cutting and accounting changes.
"Brisk sales of new models, including its new Civic, also contributed to earnings," said Takada, the analyst.
But the firm warned net profit would likely drop 14 percent to 530 billion yen over the next year as the key North American market shows signs of peaking with motorists shifting from sedans, at which Japanese makers excel, to larger vehicles such as SUVs.
Analysts have also warned of an uncertain outlook for the auto industry following President Donald Trump's drive to support US firms over foreign imports.
Revenue dropped 4.1 percent to 14 trillion yen, largely on foreign exchange fluctuations, Honda said.
For the year to March 2018, revenue is seen rising 1.4 percent to 14.2 trillion yen.