本田技研 (HMC) 2014 Q4 法說會逐字稿

Welcome to the Honda financial results audio presentation.

On April 25, 2014, Honda Motor Company announced its financial results for the fiscal fourth quarter and full year, which ended on March 31, 2014.

Through this audio presentation, we would like to review the financial results and highlight the major factors which influenced Honda's business operations during the period.

The presentation material, which will serve as the basis for today's program, is available on Honda's Investor Relations website at http://world.honda.com/investors.

For those of you who have not yet downloaded the material, please do so now, as we will start immediately following a forward-looking statement.

Forward-looking statement.

This audio presentation contains forward-looking statements, as defined in section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended.

Such statements are based on management's assumptions and beliefs, taking into account information which is currently available.

Therefore, please be advised that Honda's actual results could differ materially from those described in these forward-looking statements, as a result of numerous factors, including general economic conditions in Honda's principal markets, and foreign exchange rates between the Japanese yen and the US dollar, the euro, and other major currencies, as well as other factors detailed from time to time.

The various factors for increases and decreases in income have been classified in accordance with the method that Honda considers reasonable.

Financial summary.

We would now like to review the financial results for the full fiscal year which ended on March 31.

Please refer to slide 3.

Operating income for the fiscal year was JPY750.2 billion, a 37.7% increase compared to last year.

A number of factors contributed to this boost in earnings, including higher automobile sales in Japan and North America, a rise in motor cycle sales in Asia, cost-down effects, and positive currency effects due to a weaker yen.

Please turn to the next slide.

With respect to Honda Group unit sales, motor cycle operations realized higher sales.

mainly due to the popularity of new model introductions in India and an increase in sales in Indonesia, resulting in a total of 17,021,000 units, or a 9.9% increase compared to last year.

Within automobile business operations, new model introductions, as well as the launch of fully remodeled vehicles, led to increases in China and Japan and North America, resulting in unit sales of 4,323,000 units, an increase of 7.7%.

In power product operations, a decline in sales in other regions and Asia resulted in sales of 6,036,000 units, a decrease of 0.6%.

Consolidated unit sales for the respective business areas are as shown.

Please turn to slide 5, financial highlights for the fiscal year.

Net sales and other operating revenue totaled JPY11,842 billion, a 19.9% increase.

This was due to a rise in automobile and motor cycle net sales, the positive impact of foreign exchange fluctuations, as well as other factors.

Operating income rose to JPY750.2 billion, a 37.7% increase, mostly due to a rise in income associated with changes in sales volume and model mix, cost-down effects, as well as the positive impact of a weaker yen, which more than offset a rise in SG&A and R&D expenses and depreciation costs.

The operating margin for the fiscal year was 6.3%.

Income before income taxes totaled JPY728.9 billion.

Equity and income of affiliates amounted to JPY132.4 billion.

Net income attributable to Honda Motor was JPY574.1 billion.

Earnings per share totaled JPY318.54.

ForEx for the fiscal year was JPY100 to $1, JPY16 lower than a year earlier, and JPY136 to EUR1, JPY28 lower compared to a year ago.

Please turn to the next slide, financial forecast for fiscal 2015.

With respect to our financial forecast for the new fiscal year, we are aiming to achieve net sales and operating income of JPY12,750 billion.

Based on positive factors, such as expected increases in unit sales in all business areas, and cost-down effects, as well as consideration of the negative impact of weaker currencies in emerging markets, we are aiming for the following.

Operating income of JPY760 billion.

Income before income taxes of JPY745 billion.

Equity and income of affiliates of JPY155 billion.

And net income of JPY595 billion.

The earnings per share forecast is JPY330.14.

The ForEx assumption for the fiscal year is JPY100 to $1, and JPY135 to EUR1.

Slide 7 highlights unconsolidated financial results for the past fiscal year, as well as the unconsolidated fiscal 2015 forecast.

Please turn to slide 8 for information on the dividend.

The record date is March 31, 2014.

The dividend for the fourth quarter is expected to be JPY22 per share of common stock, a JPY2 increase compared to previous guidance on January 31, and a JPY3 increase compared to the same period a year earlier.

The total expected annual dividend is JPY82 per share of common stock, a JPY6 increase.

Furthermore, the total expected annual dividend for fiscal 2015 is JPY88 per share of common stock, a JPY6 increase.

Financial highlights for the fourth quarter.

Next we would like to discuss the results for the fiscal fourth quarter which ended on March 31.

Please turn to slide 10.

Operating income for the quarter was JPY165.2 billion, a 21.5% increase compared to the same quarter last year.

A number of factors contributed to this boost in earnings, including higher automobile sales in Japan and a rise in motorcycle sales in Asia, cost-down effects and positive ForEx effects due to a weaker yen.

Please turn to slide 11.

Regarding Honda's Group unit sales for the fourth quarter, new model introductions in India and a rise in unit sales in Indonesia resulted in a total of 4,500,000 units, an increase of 13.6%.

In automobile operations, new model introductions, as well as full model changes of existing models in China, and an increase in unit sales in Japan, more than offset the negative impact of a cold wave that led to a decrease in unit sales in North America, resulting in a total of 1,195,000 units, an increase of 15.7%.

Group unit sales in power product business operations increased slightly to 1,990,000 units, a rise of 1.4% due to unit sales increases in Europe and Asia.

Consolidated unit sales for the respective business areas are as shown.

Please turn to slide 12.

Regarding financial highlights for the fourth quarter, an increase in automobile and motorcycle sales, as well as the positive impact of ForEx fluctuations, resulted in net sales and other operating revenue of JPY3,097.2 billion, a 12.8% increase.

In terms of operating income, an increase due to the positive impact of volume and model mix, cost-down effects, and the positive impact of foreign exchange fluctuations, more than offset an increase in SG&A and R&D expenses, as well as a rise in depreciation costs, resulting in a total of JPY165.2 billion, a rise of 21.5%.

The operating margin was 5.3%.

Income before income taxes totaled JPY174.7 billion.

Equity in the income of affiliates amounted to JPY37.3 billion.

Net income attributable to Honda Motor was JPY170.5 billion.

Earnings per share totaled JPY94.61.

The ForEx rate for the fourth quarter was JPY103 to $1, JPY10 lower than a year earlier, and JPY141 to EUR1, JPY19 lower compared to a year ago.

Please turn to slide 13.

As mentioned earlier, an increase in automobile and motorcycle sales, as well as the positive impact of ForEx fluctuations, resulted in net sales and other operating revenue of JPY3,097.2 billion.

Excluding the positive contribution of JPY210.6 billion from foreign currency translation effects, the positive and negative factors which impacted net sales and operating revenue are as shown.

Net sales and operating revenue for the entire fiscal year are highlighted on slide 14.

Operating income analysis.

Next we would like to explain the positive and negative factors which impacted income before income taxes for the fourth quarter.

Please turn to slide 15.

Income before income taxes for the fiscal fourth quarter was JPY174.7 billion, an increase of JPY76.6 billion compared to the same period last year.

Operating income amounted to JPY165.2 billion, an increase of JPY29.3 billion.

Now I would like to elaborate on the increase and decrease factors impacting sales.

Sales volume and model mix resulted in a positive impact of JPY39.4 billion.

Regarding cost reduction effects, cost reductions of JPY27.1 billion were realized, despite an increase in depreciation costs, in addition to other factors.

With regard to SG&A expenses, the impact of insurance income during the same quarter of the previous fiscal year, as well as an increase in quality related expenses, resulted in a negative impact of JPY39.8 billion.

An increase in R&D expenses had a negative impact of JPY26.2 billion.

The positive impact of currency effects at the operating income level was JPY28.9 billion.

In the area of other income and expenses, fair valuations related to derivative instruments resulted in a positive impact of JPY19.8 billion, while the difference between average sales rates and transaction rates, in addition to other factors, resulted in a positive impact of JPY27.5 billion.

Please turn to the next slide.

At this time, we would like to explain the positive and negative factors which impacted income before income taxes for the full fiscal year.

Higher SG&A costs and R&D expenses, among other factors, had a negative impact on income.

But this was more than offset by the positive impact of sales volume and model mix, as well as the positive impact of currency fluctuations, resulting in a total of JPY728.9 billion, an increase of JPY240 billion compared to last year.

Details are as shown.

Business segments.

Please turn to slide 17.

Next I would like to discuss the fourth quarter results for each business area.

In motorcycle business operations, Honda Group unit sales increased due to the positive effect of new model introductions in India and increased sales in Indonesia, as well as other factors, resulting in total Group unit sales of 4,500,000, a 13.6% rise.

Please turn to the next slide.

Due to higher consolidated motorcycle unit sales and the positive impact of ForEx translation effects on net sales, net sales and other operating revenue increased to JPY448.5 billion, an increase of 19.5%.

The operating margin for the quarter was 9.6%.

Please turn to slide 19.

Next we would like to discuss automobile business operations.

With respect to Honda Automobile Group unit sales for the fiscal fourth quarter, the positive impact of new model introductions, as well as fully remodeled vehicles in Japan, China and India, more than offset the negative impact of a cold wave in North America and a decline in sales in Thailand, resulting in a total of 1,195,000, an increase of 15.7%.

Please turn to the next slide for financial highlights on this business segment for the quarter.

Net sales rose to JPY2,383 billion, an increase of 11.3%, primarily due to the positive impact of ForEx fluctuations on net sales and other operating revenue.

With respect to operating income, the impact of insurance income during the same quarter of the previous fiscal year, as well as an increase in quality related expenses which led to higher SG&A expenses, an increase in R&D expenses and other factors, more than offset cost-down effects as well as the positive effect from ForEx fluctuations, resulting in a total of JPY72.9 billion, a 5.6% decrease compared to the same period of the previous year.

The operating margin was 3.1%.

Please turn to slide 21.

Next, we would like to review the operations of power products and other businesses for the fourth quarter.

Honda Group unit sales rose due to an increase in snow blower sales in North America and a rise in OEM engine sales in Europe and Asia, despite an overall decline in the North American market due to a cold wave, resulting in a total of 1,999,000 units, an increase of 1.4%.

Please turn to the next slide.

In the power products and other businesses segment, the positive impact of ForEx fluctuations and other factors on net sales and other operating revenue resulted in a total of JPY85.6 billion, an increase of 3.1% compared to the same period last year.

Operating income was JPY500 million due to an increase in income associated with the positive impact of sales volume and mix.

The operating margin was 0.7%.

Please turn to slide 23.

In the financial services business segment, the total assets of finance subsidiaries at the end of the fourth quarter totaled JPY7,980 billion.

Net sales and other operating revenue totaled JPY190.4 billion, an increase of 22.9%.

Operating income was JPY48.8 billion, an increase of 19.3% due to positive currency effects and other factors.

The operating margin was 25.6%.

Please turn to the next slide.

This slide highlights Honda Group unit sales by business segment for the full fiscal year.

Please turn to slide 25.

This slide highlights the financial results for the full fiscal year by business segment.

Geographical regions.

Please turn to slide 26.

Next, we would like to review Honda's business results by geographical region for the fourth quarter.

In Japan, cost-down effects and an increase in income associated with the positive impact of volume and model mix was more than offset by an increase in R&D expenses, as well as other factors, resulting in operating income of JPY43.2 billion, a decrease of 7.3%.

In North America, operating income was JPY41.8 billion, an increase of 44.2%, primarily due to cost-down effects as well as the positive impact of currency effects, despite an increase in SG&A costs and other factors.

In Europe, operating income amounted to JPY14.9 billion, a decrease of 26.8%, primarily due to the negative impact on income from lower sales volume and model mix.

In Asia, operating income was JPY54 billion, an increase of 42.2% compared to the same period last year, primarily due to the positive impact on income from an improvement in sales volume and model mix, cost-down effects, as well as positive ForEx effects, despite an increase in SG&A costs.

Operating income for the other regions category, which includes South America, the Near and Middle East, Africa and Oceania, was JPY12.9 billion, an increase of 26.5%, mainly due to the positive impact on income from an improvement in sales volume and model mix, despite an increase in SG&A expenses.

Please turn to slide 27.

For your reference, this slide highlights the financial results for the full fiscal year by geographic region.

Please turn to the next slide, equity and income of affiliates.

Equity and income of affiliates for the fourth quarter amounted to JPY37.3 billion, an increase of 185.8%, mainly due to an increase in unit sales in Asia and the positive impact of ForEx effects, in addition to other factors.

Equity and income of affiliates in Asia totaled JPY30 billion.

Please turn to slide 29, capital expenditures.

Consolidated capital expenditures for the full fiscal year amounted to JPY726.1 billion, an increase of JPY132.5 billion compared to the previous year, mainly due to an increase in investment for plant and equipment within automobile business operations, as well as the impact of foreign currency fluctuation.

For your reference, increases and decreases in capital expenditures by business segment, excluding the impact of currency translation effects, are as shown in the attached chart.

Group unit sales forecast.

We will now explain the unit sales forecast for each business segment for fiscal 2015.

Please turn to slide 31.

The Honda Group unit sales forecast is as follows.

Motorcycle business operations 18,240,000 units.

Automobile business operations 4,830,000 units.

Power product and other businesses 6,345,000 units.

Please turn to the next slide.

The Honda consolidated unit sales forecast by business segment is as follows.

Motorcycle business operations 11,030,000.

Automobile business operations 3,870,000 units.

Power product and other businesses 6,345,000 units.

Please turn to slide 33.

We would now like to once again highlight the updated fiscal 2015 consolidated financial forecast.

Operating income JPY760 billion.

Income before income taxes JPY745 billion.

Net income attributable to Honda Motor JPY595 billion.

The increase and decrease factors behind the changes from the previous fiscal year are shown in the profit walk simulation on slide 34.

Changes in sales volume and model mix other, plus JPY125.7 billion.

Cost down other, plus JPY50 billion.

SG&A increase, minus JPY87 billion.

R&D increase, minus JPY12 billion.

On the operating income level, excluding the negative impact of currency fluctuations from emerging countries, an increase of JPY76.7 billion is forecast.

ForEx effects, minus JPY67 billion.

Other income and expenses, minus JPY6.3 billion.

Please turn to slide 35.

Finally, we would like to highlight our fiscal 2015 forecast for capital expenditures, depreciation costs and R&D expenses.

The forecasts for capital expenditures is JPY650 billion.

The forecast for depreciation costs and amortization is JPY415 billion.

The forecast for R&D expenses is JPY645 billion.

This concludes our financial results presentation.

We hope that you've found this audio explanation helpful.

I would like to thank you for your continued interest in Honda's activities.

Statements in English on this transcript were spoken by an interpreter present on the live call.

The interpreter was provided by the Company sponsoring this Event.