本田技研 (HMC) 2015 Q1 法說會逐字稿

Welcome to the Honda Financial Results Audio Presentation. On July 29 2014 Honda Motor Company announced its financial results for the fiscal first quarter which ended on June 30 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 a method that Honda considers reasonable.

Financial summary. We would now like to review the financial summary for the fiscal first quarter which ended on June 30. Please refer to slide 3.

Operating income for the first quarter was JPY198 billion, a 7.1% increase compared to the same period last year. This was mainly due to a rise in automobile sales as a result of the positive effect of new model introductions and full model changes in Japan and Asia, in addition to the positive impact of cost reduction efforts.

Please turn to the next slide. With respect to Motorcycle Group unit sales new model introductions in India and other countries led to an increase in sales, resulting in a total of 4.137 million units, or a 2% increase.

Within automobile operations new model introductions, as well as full model changes in Japan, Asia and other countries led to higher sales.

The Automobile Group unit sales total for the quarter was 1.061 million units, a 6.2% increase.

In Power Product operations a decline in engine sales in North America and other factors resulted in Group unit sales of 1.510 million, a decrease of 5%.

The consolidated sales totals for each business area are as shown.

Please turn to slide 5. Financial highlights for the first quarter. Net sales and other operating revenue totaled JPY2.988 trillion. A 5.4% increase compared to the same period last year. This was primarily due to a rise in automobile and motorcycle unit sales, the positive impact of foreign exchange fluctuations and other factors.

Operating income rose to JPY198 billion, a 7.1% increase. This was mostly due to the positive impact of cost reduction efforts, higher income associated with a positive change in revenue and model mix as well as other factors, which more than offset a rise in SG&A expenses, higher depreciation costs, resulting from the startup of a new plant and negative ForEx effects.

The operating margin was 6.6%. Income before income taxes totaled JPY198.8 billion. Equity in income of affiliates amounted to JPY38.5 billion. Net income attributable to Honda Motor for the quarter was JPY146.5 billion. EPS for the quarter totaled JPY81.29. ForEx for the quarter was JPY102 to $1, JPY3 lower than a year earlier. The euro rate was JPY140 to EUR1, JPY11 lower compared to the same period last year.

Please turn to the next slide. Financial forecast for fiscal year 2015. With respect to our financial forecast for the current fiscal year, lower consolidated unit sales are expected in motorcycle and power product operations compared to our previous forecast. However, reflecting a change in the ForEx environment and its impact on first quarter results, our forecast has been revised as follows.

Net sales and other operating revenue, JPY12.8 trillion. Operating income, JPY770 billion. Income before income taxes, JPY755 billion. Equity in income of affiliates JPY155 billion. Net income attributable to Honda Motor JPY600 billion. EPS is forecast to be JPY332.91.

The ForEx assumption, starting from the second quarter, is JPY100 to $1 and EUR135 to the $1 [(sic - "JPY135 to EUR1").

The ForEx assumption for the fiscal year is JPY101 to $1 and EUR136 to $1 (sic - "JPY136 to EUR1").

Please turn to slide 7 for information on the dividend. Unchanged from our previous announcement on April 25 the first quarter dividend is expected to be JPY22 per common stock. A JPY2 increase compared to the same period last year.

The annual dividend for fiscal year 2015 is expected to be JPY88 per common stock. A JPY6 increase per share of common stock compared to a year earlier.

Revenue and operating income analysis. Next we would like to discuss the results for the fiscal first quarter which ended on June 30. Please turn to slide 9. An increase in automobile and motorcycle unit sales as well as the positive impact from ForEx translation effects led to net sales and other operating revenue of JPY2.988 trillion.

Please turn to slide 10. Next we would like to explain the positive and negative factors which impacted income before income taxes for the quarter. Income before income taxes was JPY198.8 billion, an increase of JPY26.7 billion compared to the same period last year. Operating income amounted to JPY198 billion, an increase of JPY13 billion.

With respect to revenue and model mix a change in unit volume and model mix resulted in a positive impact of JPY22.7 billion.

Regarding the cost reduction efforts, a positive impact of JPY25.1 billion was realized. An increase in SG&A expenses, primarily due to quality related factors, had a negative impact of JPY23 billion. An increase in R&D expenses had a negative impact of JPY900 million. At the operating income level the negative impact of currency effects from weaker currencies in emerging countries was JPY10.8 billion. In the area of other income and expenses fair valuations related to derivative instruments resulted in a negative impact of JPY22.2 billion. In the other category differences between average sales rates and translation rates and other factors resulted in a positive impact of JPY35.9 billion.

Business segment. Please turn to slide 11. Next I would like to discuss the first quarter results from each business area. In motorcycle business operations Group unit sales decreased in the other regions category and other countries. But the positive impact of new model introductions in India and other factors led to a total Group unit sales total of 4.137 million units, a 2% rise.

Please turn to the next slide. ForEx translation effects had a negative influence on net sales, but an increase in consolidated unit sales resulted in a total of JPY407.7 billion, an increase of 2.7%. Operating income increased to JPY43.9 billion, an increase of 3.3% compared to the same period last year. This was primarily due to an increase in income related to revenue and model mix, as well as other factors which more than offset the negative impact of higher SG&A expenses, ForEx effects and other factors. The operating margin for the quarter was 10.8%.

Please turn to slide 13. Next we would like to discuss automobile business operations. With respect to automobile Group unit sales a decrease occurred in Thailand but the positive effect of new model introductions, as well as full model changes in Japan and other countries in the Asian region, led to a total of 1.061 million units, an increase of 6.2%.

Please turn to the next slide for financial highlights on this business segment for the quarter. Net sales rose to JPY2.323 trillion, an increase of 5.6%, primarily due to an increase in consolidated unit sales as well as the positive impact of ForEx fluctuations.

With respect to operating income, higher SG&A expenses and other factors were more than offset by cost reduction efforts and an increase in income associated with revenue and model mix, resulting in a total of JPY99.8 billion, a 3.6% increase compared to the same period of the previous year. Operating margin was 4.3%.

Please turn to slide 15. Next we would like to review power product business operations for the first quarter. Honda Group unit sales rose in Japan due to robust OEM engine demand. But lower engine sales in North America and Asia had a negative impact on overall sales in the segment, resulting in a total of 1.510 million units, a decrease of 5%.

Please turn to the next slide. In the power products and other businesses segment a positive impact from ForEx translation effects led to a rise in revenue, but this was more than offset by lower unit sales in power product operations, resulting in a total of JPY77 billion. A decrease of 1.2% compared to the same period last year.

Operating income rose to JPY2.3 billion, an increase of 75.5%, primarily due to the positive impact of lower R&D and SG&A expenses. The operating margin was 3.1%.

Please turn to slide 17. In the financial services business segment the total assets of finance subsidiaries at the end of the first quarter totaled JPY8.009 trillion. Net sales totaled JPY189.3 billion, a rise of 12.7%, in part due to the positive impact of a rise in operating lease revenues, positive currency effects as well as other factors. Operating income was JPY51.8 billion, an increase of 16.1% due to higher income associated with rising revenues and positive currency effects. Operating margin was 27.4%.

Geographical region. Please turn to slide 18. Next we would like to review Honda's business results by geographical region for the quarter.

In Japan operating income for the quarter was JPY62.1 billion, unchanged from the same period a year earlier, as cost reduction efforts were offset by higher SG&A costs and other factors.

Operating income in North America for the quarter amounted to JPY67.5 billion, a decline of 6% due mainly to the negative impact on income from volume and model mix, an increase in SG&A expenses as well as other factors which more than offset cost reduction efforts.

In Europe operating losses amounted to JPY1.4 billion, an improvement of JPY8.2 billion due to a reduction in SG&A expenses and cost reduction efforts.

Operating income in Asia was JPY65.2 billion, an increase of 21.4% compared to the same period last year, mostly due to the positive impact on revenue related to sales volume and mix which more than offset an increase in SG&A expenses.

Operating income for other regions, which include South America, the Near and Middle East, Africa as well as Oceania was JPY4.5 billion, a decrease of 15.2%, mainly due to an increase in SG&A expenses and a negative impact of ForEx effects.

Please turn to slide 19. Equity in income of affiliates. Equity in income of affiliates amounted to JPY38.5 billion, an increase of 21.5%. This increase was predominantly due to an increase in income of affiliates in Asia. Equity in income of affiliates in Asia, as indicated at the bottom of the slide, totaled JPY29.5 billion.

Please refer to slide 20, capital expenditures. Consolidated capital expenditures for the first quarter amounted to JPY140.6 billion, a decrease of JPY30.7 billion, mainly due to a reduction in automobile operation expenditures. For your reference, increases and decreases in capital expenditures by business segment, excluding the impact of currency translation effects, is as shown.

Please turn to slide 22, Group unit sales forecast. We would now like to review the unit sales forecast for the fiscal year for each business operation. The Honda Group unit sales forecast is as follows. Motorcycle operations, 18.080 million units. This is a decrease of 160,000 units compared to our previous forecast.

Automobile operations, 4.830 million units. This is unchanged from our previous forecast.

Power and product operations, 6.335 million units. This is a decrease of 10,000 units compared to our previous forecast.

Please turn to slide 23. With respect to consolidated unit sales, changes in sales units have been reflected in the forecast for each business segment as follows. Motorcycle operations, 10.915 million units. Power and product operations, 6.335 million units. These figures represent a revision of our April 25 forecast. Our consolidated unit sales forecast for automobile operations is unchanged at 3.870 million units.

Please turn to slide 24. We would now like to highlight the fiscal year 2015 consolidated financial forecast. The forecast for operating income is JPY770 billion. The forecast for income before income taxes is JPY755 billion. Our expectation for net income attributable to Honda Motor Company is JPY600 billion.

Please refer to slide 25 to see the profit walk simulation impacting operating income for fiscal year 2015 versus the previous fiscal year. The increase and decrease factors are as follows. Revenue, model mix et cetera plus JPY125.7 billion. Cost reduction et cetera, plus JPY50 billion. Increase in SG&A expenses, minus JPY87 billion. Increase in R&D expenses, minus JPY12 billion. Currency effects, minus JPY57 billion. Other income and expenses, plus JPY6.3 billion.

Please turn to the next slide. As mentioned earlier out operating income forecast for the fiscal year has been raised by JPY10 billion. This reflects the positive impact from currency effects. There are no changes in our outlook for any of the other decrease and increase factors.

Please turn to slide 27. Finally we would like to highlight our forecast for capital expenditures, depreciation and R&D expenses for fiscal year 2015 which are unchanged since our April 25 announcement. The forecast for capital expenditures is JPY650 billion. The forecast for depreciation and amortization is JPY415 billion. The forecast for R&D expenses is JPY645 billion.

This concludes our financial results presentation. We hope you found this audio explanation helpful and would like to thank you for your continued interest in Honda's activities.