本田技研 (HMC) 2015 Q2 法說會逐字稿

Welcome to the Honda financial results audio presentation. On October 28, 2014, Honda Motor Company announced its financial results for the fiscal second quarter, which ended on September 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 statements. 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 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 second quarter which ended on September 30. Please refer to slide 3.

The second quarter was marked by heightened competition in the automobile markets in North America and Japan, as well as a positive effect from new automobile model introductions in Asia.

These developments, combined with the positive effect of continued cost-reduction efforts, resulted in operating income of JPY164.4 billion for the quarter.

Please turn to the next slide. With respect to motorcycle Group unit sales, strong sales in India, Indonesia and other countries led to a total of 4.581 million or an 8.7% increase.

Within automobile operations, new model introductions, as well as full-model changes in Asia and other countries, led to higher sales of 1.071 million units, a 2.3% increase.

In power product operations, a decline in portable generator and water pump sales in Asia, as well as other factors, resulted in Group unit sales of 1.286 million units, a 0.7% decrease.

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

Please turn to slide 5; financial highlights for the second quarter. Net sales and other operating revenue totaled JPY3,014.7 billion, a 4.3% 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 amounted to JPY164.4 billion, a 4.1% decrease. This was mostly due to a negative change in model mix, higher R&D expenses, as well as other factors, which more than offset the positive impact of cost-reduction efforts, positive ForEx effects and other factors.

The operating margin was 5.5%.

Income before income taxes totaled JPY179.8 billion. Equity in income of affiliates amounted to JPY22.7 billion.

Net income attributable to Honda Motor for the quarter was JPY141.8 billion, an increase of 17.9% compared to the same period last fiscal year.

EPS for the quarter totaled JPY78.73.

ForEx for the quarter was JPY104 to $1, JPY5 lower than a year earlier; and JPY138 to EUR1, JPY7 lower compared to the same period last year.

Please turn to the next slide; financial highlights for the first half of fiscal 2015. Honda Group unit sales for the first half of the fiscal year were as follows: motorcycle business operations, 8.718 million units; automobile business operations, 2.132 million units; power product business operations, 2.796 million units.

Net sales and other operating revenue was JPY6,003 billion. Operating income was JPY362.4 billion.

Income before income taxes totaled JPY378.6 billion. Equity in income of affiliates amounted to JPY61.3 billion. Net income attributable to Honda Motor was JPY288.4 billion. EPS for the first half of the fiscal year totaled JPY160.02.

Please turn to slide 7; financial forecast for fiscal year 2015. With respect to our financial forecast for the current fiscal year reflecting severe business conditions, primarily in Japan, China, and South America, as well as ForEx effects from a weaker yen, we have revised our forecast as follows.

Net sales and other operating revenue JPY12,750 billion. Operating income JPY770 billion. Income before income taxes JPY765 billion. Equity in income of affiliates JPY120 billion. Net income attributable to Honda Motor JPY565 billion.

EPS is forecast to be JPY313.49.

The ForEx assumption for the second half is JPY105 to the dollar, and JPY135 to the euro. The ForEx assumption for the fiscal year is JPY104 to the dollar and JPY137 to the euro. For your reference the unconsolidated forecast for the fiscal year is shown on slide 8.

Please turn to slide 9 for information on the dividend. Unchanged from our previous announcement, the second quarter dividend is 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 details of the results for the fiscal second quarter, which ended on September 30. Please turn to slide 11.

For the fiscal second quarter an increase in motorcycle and automobile unit sales, as well as the positive impact from ForEx translation effects, as well as other factors, led to net sales and other operating revenue of JPY3,014.7 billion.

For your reference net sales and other operating revenue for the fiscal first half are shown on slide 12.

Please turn to the next slide. Next we would like to explain the positive and negative factors which impacted income before income taxes for the second quarter.

Income before income taxes was JPY179.8 billion, an increase of JPY14.2 billion compared to the same period last year. Operating income amounted to JPY164.4 billion, a decrease of JPY7 billion compared to the same period last year.

With respect to revenue and model mix, a negative impact of JPY29.5 billion was realized, this was primarily due to a change in model mix and other related factors, as well as an increase in incentives.

Regarding cost-reduction efforts, a positive impact of JPY15.2 billion was realized. A decrease in SG&A expenses had a positive impact of JPY6.9 billion. An increase in R&D expenses had a negative impact of JPY9.7 billion.

At the operating income level the positive impact of ForEx currency effects was JPY10 billion. In the area of other income and expenses, fair valuations related to derivative instruments resulted in a negative impact of JPY13.9 billion. In the other category differences between average sales rates and transaction rates and other factors resulted in a positive impact of JPY35.2 billion.

Please turn to slide 14. With respect to income before income taxes for the fiscal first half, an increase in SG&A expenses, as well as other factors, was more than offset by cost-reduction efforts and other factors, resulting in a total of JPY378.6 billion, an increase of JPY41 billion.

Please turn to the next slide, business segments. Next we would like to discuss the second quarter results for each business area. In motorcycle business operations Group unit sales decreased in the other regions category, mainly due to lower sales in Brazil. But the positive impact of robust sales in India, Indonesia and Vietnam led to total Group unit sales of 4.581 million, an 8.7% rise.

Please turn to slide 16. An increase in consolidated unit sales as well as the positive impact of ForEx translation effects resulted in net sales and other operating revenue of JPY438.3 billion, an increase of 4.9%.

Operating income declined to JPY38.1 billion, a decrease of 16.3% compared to the same period last year. This was primarily due to the impact from a decrease in unit sales in South America, a rise in SG&A expenses, as well as other factors which more than offset an increase in unit sales in Asia. The operating margin for the quarter was 8.7%.

Please turn to slide 17. Next we would like to discuss automobile business operations. With respect to automobile Group unit sales, sales declined in Thailand, the US and Japan, but the positive effect of the Honda MOBILIO introduction in India and Indonesia, led to a total of 1.071 million units, an increase of 2.3%.

Please turn to the next slide for financial highlights on this business segment for the quarter. Net sales rose to JPY2,316 billion, an increase of 3.7%, due to an increase in consolidated unit sales, the positive impact of ForEx fluctuations on sales revenue, as well as other factors.

With respect to operating income, the positive impact from cost-reduction efforts and a decline in SG&A expenses were more than offset by an increase in incentives, a rise in R&D expenses, and other factors, resulting in a total of JPY79.1 billion, a 1.3% decrease compared to the same period of the previous year. Operating margin was 3.4%.

Please turn to slide 19. Next we would like to review power product business operations for the second quarter.

Honda Group unit sales rose in Europe due to higher OEM engine and lawnmower sales. But lower portable generator and water pump sales in Asia had a negative impact on overall sales in this segment, resulting in a total of 1.286 million units, a decrease of 0.7%.

Please turn to the next slide. In the power products and other businesses segment net sales and other operating revenue remained relatively unchanged from a year earlier at JPY75.4 billion. Operating loss totaled JPY1 billion, a worsening of JPY200 million, primarily due to higher SG&A expenses and other factors, despite the positive effect of cost-reduction efforts and other factors. The operating margin was a negative 1.4%.

Please turn to slide 21. In the financial services business segment, the total assets of finance subsidiaries at the end of the second quarter totaled JPY8,659 billion.

Net sales totaled JPY195.6 billion, a rise of 13.4%, primarily due to the positive impact of a rise in operating lease revenues, positive currency effects, as well as other factors.

Operating income was JPY48.2 billion, an increase of 3.6%, due to positive currency effects and other factors. Operating margin was 24.7%.

The first-half results for each business segment are highlighted on the next slide.

Geographical regions. Next we would like to review Honda's business results by geographical region for the quarter. Please turn to slide 23.

In Japan, operating income for the quarter was JPY59.8 billion, a 21.5% increase compared to the same period a year earlier, as cost-reduction efforts, positive ForEx effects, and other factors more than offset higher SG&A and R&D expenses, and other factors.

Operating income in North America for the quarter amounted to JPY38.9 billion, a decrease of 15.4%, due mainly to the negative impact from a change in volume and model mix, an increase in incentives as well as other factors, despite an increase in SG&A expenses and other factors.

In Europe, operating losses amounted to JPY7.5 billion, an improvement of JPY6 billion, due to the positive impact from a change in volume and model mix, as well as other factors, despite negative ForEx effects.

Operating income in Asia was JPY68.4 billion, an increase of 14.1% compared to the same period last year, mostly due to the positive impact related to a change in sales volume and mix, cost-reduction efforts, positive ForEx effects and other factors, which more than offset an increase in SG&A expenses.

Operating income for other regions, which includes South America, the Near and Middle East and Africa, as well as Oceania, was JPY9.1 billion. A decrease of 50.7%, mainly due to the negative impact related to a change in sales volume and mix.

For your reference, first-half results by geographic region are shown on slide 24.

Please turn to the next slide, equity in income of affiliates. Equity in income of affiliates amounted to JPY22.7 billion, a decrease of 28.2%. This decrease was due to the realization of stock valuation losses of JPY15.9 billion for certain Japanese affiliated companies and other factors, which more than offset an increase in income of affiliates in Asia.

Equity in income of affiliates in Asia, as indicated at the bottom right of the slide, totaled JPY32.5 billion.

Please refer to slide 26, capital expenditures. Consolidated capital expenditures for the first half amounted to JPY300.2 billion, a decrease of JPY3.4 billion, due to a reduction in expenditures in all business segments.

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

Please turn to slide 28, Group unit sales forecast. We would now like to review the unit sales forecasts for the fiscal year for each business operation.

The Honda Group unit sales forecast is as follows, motorcycle business operations, 17.950 million units. This is a decrease of 130,000 units compared to our previous forecast, and is based on the assumption that unfavorable market conditions will continue, especially in South America and Asia.

Automobile business operations, 4.620 million units. This is a decrease of 210,000 units from our previous forecast, and is based on the assumption that difficult market conditions will continue to exist, predominantly in Japan and China.

Power product business operations, 6.185 million units. This is a decrease of 150,000 units compared to our previous forecast and assumes lower engine sales in Asia.

Please turn to slide 29. With respect to consolidated unit sales, changes in sales units have been reflected in the forecasts for each business segment as follows: motorcycle business operations, 10.850 million units; automobile business operations, 3.760 million units; power product business operations, 6.185 million units.

Please turn to slide 30. 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 JPY765 billion. Our expectation for net income attributable to Honda Motor Company is JPY565 billion.

Please refer to slide 31 to see the profit walk simulation impacting operating income for fiscal 2015 versus the previous fiscal year. The increase and decrease factors are as follows.

Revenue, model mix, etc., plus JPY73.7 billion; cost reduction, etc., plus JPY43 billion; increase in SG&A expenses, minus JPY84 billion; increase in R&D expenses, minus JPY12 billion; currency effects, minus JPY1 billion; other income and expenses, plus JPY16.3 billion.

Please turn to slide 32. As mentioned earlier, we assume that unfavorable market conditions will exist in certain markets during the second half of this fiscal year. Reflecting this expectation, as well as the impact of a weaker yen, increase and decrease factors compared to our previous fiscal year forecast are as follows.

Revenue, model mix etc., minus JPY52 billion; cost reduction, etc., minus JPY7 billion; decrease in SG&A expenses, plus JPY3 billion; currency effects, plus JPY56 billion; other income and expenses, plus JPY10 billion.

Please turn to slide 33. Finally, we would like to highlight our forecast for capital expenditures, depreciation, and R&D expenses for FY2015.

Reflecting currency translation effects, the forecast for capital expenditures has been raised by JPY20 billion, to JPY670 billion. The forecast for depreciation and amortization is unchanged at JPY415 billion. The forecast for R&D expenses is unchanged at JPY645 billion.

This concludes our financial results' presentation. We hope that you found this audio explanation helpful and 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.