本田技研 (HMC) 2015 Q4 法說會逐字稿

Welcome to the Honda Financial Results Audio Presentation.

On April 28, 2015, Honda Motor Company announced its financial results for the fiscal fourth quarter and full year which ended on March 31, 2015. 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. Before discussing details of the fiscal results, I would like to inform you that going forward, Honda is changing its accounting standard to International Financial Reporting Standards or IFRS from US Generally Accepted Accounting Principles or US GAAP. Reflecting this change, our Form 20-F filing in June will be based on IFRS. Today's presentation on the results for the past fiscal year, which ended on March 31, will be based on US GAAP. However, our guidance for the new fiscal year which started on April 1 will be based on IFRS. For reference purposes, US GAAP based guidance figures will also appear on the slides.

We would now like to review the financial results for the full fiscal year, which ended on March 31, 2015. Please refer to slide 3. Strong sales growth in Asia, costs down effects and positive currency effects due to a weaker yen made a positive contribution to earnings. However, lower unit sales in Japan due to severe market conditions as well as higher SG&A expenses, including quality-related costs led to a decline in operating income to JPY651.6 billion for the fiscal year.

Please turn to the next slide. With respect to Honda Group unit sales, motorcycle business operations realized higher sales in India, Indonesia and Vietnam, which more than offset declines in South America and Thailand, resulting in a total of 17,765,000 units or a 4.4% increase compared to last year. Within automobile business operations, new model introductions led to a rise in sales in Indonesia, India and China, which along with other factors more than offset unit sales declines brought on by difficult market conditions in Japan and Thailand. This resulted in total Group unit sales of 4,364,000 units, an increase of 0.9%. In Power product operations, a decline in sales predominantly in Asia and North America resulted in sales of 6,001,000 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 JPY12,646.7 billion, a 6.8% increase. This was due to a rise in motorcycle net sales, the positive impact of foreign exchange fluctuations, as well as other factors. Operating income declined to JPY651.6 billion, a 13.1% decrease mostly due to a rise in SG&A expenses including quality related costs as well as the negative impact of changes in sales volume in model mix and other factors, which more than offset cost down effects and the positive impact of a weaker yen. The operating margin for the fiscal year was 5.2%.

Income before income taxes totaled JPY689.6 billion. Equity in income of affiliates amounted to JPY126.5 billion. Net income attributable to Honda Motor was JPY522.7 billion. Earnings per share totaled JPY290.06. ForEx for the fiscal year was JPY110 to the US dollar, JPY10 lower than a year earlier and JPY139 to the euro, JPY3 lower compared to a year ago.

Please turn to the next slide. Financial forecast for fiscal 2016. With respect to our financial forecast for the current fiscal year, we are aiming to achieve the following. Sales revenue, JPY14,500 billion. Operating profit, JPY685 billion. The share of profit from investments accounted for using the equity method, JPY135 billion. Profit before income taxes, JPY805 billion. Profit for the year attributable to owners of the parent, JPY525 billion. The earnings per share forecast is JPY291.30. For your reference, the corresponding US GAAP based forecast for the fiscal year is as shown. The ForEx assumption for the fiscal year is JPY115 to the US dollar and JPY125 to the euro.

Please turn to slide 7 for information on the dividend. The record date is March 31, 2015. The dividend for the fourth quarter is expected to be JPY22 per share of common stock as forecasted. The total expected annual dividend is JPY88 per share of common stock, a JPY6 increase. Further, the total expected annual dividend for fiscal 2016 is JPY88 per share of common stock, the same as the previous fiscal year.

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 9. Strong sales growth in Asia, positive currency effects due to a weaker yen and other factors made a positive contribution to earnings. However, lower unit sales in Japan due to severe market conditions as well as higher SG&A expenses, including quality-related costs as well as other factors led to a decline in operating income for the quarter to JPY111.9 billion.

Please turn to slide 10. Regarding Honda's Group unit sales for the fourth quarter, robust motorcycle sales in Asia more than offset lower sales in South America, resulting in a total of 4,615,000 units, an increase of 2.6% compared to the previous year. In automobile business operations, challenging market conditions in Japan were more than offset by robust sales in Asia and other regions, resulting in a total of 1,204,000 units, an increase of 0.8%. Group unit sales in Power product business operations increased to 2,057,000 units, a rise of 3.4% due to unit sales increases in North America and Europe. Consolidated unit sales for the respective business areas are as shown.

Please turn to slide 11. Regarding financial highlights for the fourth quarter, a decrease in automobile sales was more than offset by an increase in motorcycle sales as well as the positive impact of ForEx fluctuations and other factors, resulting in net sales and other operating revenue of JPY3,353.7 billion, an 8.3% increase. In terms of operating income, the positive impact of foreign exchange fluctuations was more than offset by an increase in SG&A expenses including quality-related costs and the negative impact of volume and model mix and other factors, resulting in a total of JPY111.9 billion, a decrease of 32.3%. The operating margin was 3.3%.

Income before income taxes totaled JPY116.8 billion. Equity in income of affiliates amounted to JPY36.6 billion. Net income attributable to Honda Motor was JPY97.8 billion. Earnings per share totaled JPY54.29. The ForEx rate for the fourth quarter was JPY119 to the US dollar, JPY16 yen lower than a year earlier, and JPY134 to the euro, JPY7 higher compared to a year ago.

Please turn to slide 12. As mentioned earlier, an increase in motorcycle sales as well as the positive impact of ForEx fluctuations and other factors more than offset a decrease in automobile sales, resulting in net sales and other operating revenue of JPY3,353.7 billion for the fiscal fourth quarter. Excluding the positive contribution of JPY290.9 billion from foreign currency translation effects, the positive and negative factors that impacted net sales and operating revenue are as shown. Net sales and operating revenue for the entire fiscal year are highlighted on slide 13. Operating income analysis.

Next, we would like to explain the positive and negative factors that impacted income before income taxes for the fourth quarter. Please turn to slide 14. Income before income taxes for the fiscal fourth quarter totaled JPY116.8 billion, a decrease of JPY57.8 billion compared to the same period last year. Operating income amounted to JPY111.9 billion, a decrease of JPY53.3 billion.

Now, I would like to elaborate on the increase and decrease factors impacting sales. Within sales volume and model mix and negative impact on sales volume, as well as the negative impact of the West Coast Port strike in the US and expenses associated with the start up of new plants in addition to other factors, resulted in a decrease of JPY29.2 billion.

Regarding cost reduction effects, a decline in unit production resulted in a cost reduction total of JPY8.8 billion. With regard to SG&A expenses, an increase in advertising expenses as well as an increase in quality related costs and other factors resulted in a negative impact of JPY49.6 billion. An increase in R&D expenses had a negative impact of JPY1.5 billion.

The positive impact of currency effects at the operating income level was JPY35.9 billion. In the area of other income and expenses, fair valuations related to derivative instruments resulted in a negative impact of JPY15.3 billion while the difference between average sales rates and transaction rates in addition to other factors, resulted in a positive impact of JPY10.8 billion.

Please turn to slide 15. At this time, we would like to summarize the positive and negative factors which impacted income before income taxes for the full fiscal year. Cost down effects and the positive impact of currency fluctuations and other factors were more than offset by higher SG&A expenses, including quality related costs and negative impact on sales volume and model mix as well as other factors, resulting in a total of JPY689.6 billion, a decrease of JPY39.3 billion compared to last year. Details are as shown.

Please turn to slide 16. Business segment. Next I would like to discuss the 4th quarter results for each business area. In motorcycle business operations, Honda Group unit sales increased due to higher sales in India and Indonesia as well as other countries which offset a decline in South America, resulting in total Group unit sales of 4,615,000 units, a 2.6% increase.

Please turn to the next slide. Due to higher consolidated motorcycle unit sales, the positive impact of ForEx translation effects on net sales as well as other factors. Net sales and other operating revenues increased to JPY514.5 billion, an increase of 14.7% compared to the same period last year. Operating income increased to JPY45.6 billion, an increase of 6.2% primarily due to higher income associated with an improvement in sales volume and model mix, the positive impact of ForEx fluctuation as well as other factors, which more than offset the negative impact of increased SG&A costs and other factors. The operating margin for the quarter was 8.9%.

Please turn to slide 18. Next, we would like to discuss automobile business operations. With respect to Honda Automobile Group unit sales for the fiscal fourth quarter, new model introductions as well as fully remodeled vehicles in India and China, more than offset the negative impact of severe market conditions in Japan and other factors, resulting in a total of 1,204,000 units, an increase of 0.8%.

Please turn to the next slide for financial highlights on this business segment for the quarter. Net sales rose to JPY2,534.1 billion, an increase of 6.3% primarily due to the positive impact of ForEx fluctuations on net sales and other operating revenue as well as other factors, despite lower unit sales and other factors. With respect to operating income, an increase in SG&A expenses including quality related costs, a decline in sales revenue as a result of a negative change in sales volume and model mix, the negative impact of the West Coast Port strike in the US, expenses associated with the start up of new clients, the negative impact of lower production volume as well as other factors more than offset the positive effect from ForEx fluctuations and other factors, resulting in a total of JPY20.8 billion, a 71.5% decrease compared to the same period of the previous year. The operating margin was 0.8%.

Please turn to slide 20. 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 OEM engine and lawn mower sales in North America and a rise in OEM engine sales in Europe, resulting in a total of 2,057,000 units, an increase of 3.4%.

Please turn to the next slide. In the Power products and other businesses segment, an increase in consolidated unit sales and the positive impact of ForEx fluctuations and other factors on net sales and other operating revenue resulted in a total of JPY95.3 billion, an increase of 11.4% compared to the same period last year. Operating losses totaled negative JPY4.5 billion due to a rise in expenses associated with other businesses and the negative impact of currency translation effects, as well as other factors. This was a deterioration of JPY5 billion compared to the same period a year earlier. The operating margin was minus 4.7%.

Please turn to slide 22. In the Financial Services business segment, the total assets of finance subsidiaries at the end of the fourth quarter totaled JPY9,341 billion. Net sales and other operating revenue totaled JPY225.2 billion, an increase of 18.3% compared to the same period a year earlier, primarily due to an increase in sales from operating leases and positive currency translation effects. Operating income was JPY50 billion, an increase of 2.5% due to positive currency effects and other factors which more than offset the negative impact of higher expenses related to lease residual values and other factors. The operating margin was 22.2%.

Please turn to slide 23. This slide highlights Honda Group unit sales by business segment for the full fiscal year. Please turn to slide 24. This slide highlights the financial results for the full fiscal year by business segment.

Please turn to slide 25, geographical regions. Next, we would like to review Honda's business results by geographical region for the fourth quarter. In Japan, the positive impact of currency effects was more than offset by a decrease in income associated with the negative impact of volume and model mix, an increase in SG&A expenses. The negative impact of lower production volume as well as other factors resulting in operating income of JPY13.7 billion, a decrease of 68.3%. In North America operating income was JPY11.6 billion, a decrease of 72.1% compared to the same period last year. The decrease was primarily due to an increase in SG&A expenses, the negative impact of the West Coast Port strike in the US, expenses associated with the start up of new plants as well as other factors.

In Europe, the operating loss amounted to JPY5.7 billion, a decrease of JPY20.6 billion compared to the same period last year, primarily due to higher SG&A expenses and negative impact on income from lower sales volume in model mix as well as other factors. In Asia, operating income was JPY70.7 billion, an increase of 30.9% compared to the same period last year, primarily due to cost down effects. The positive impact on income from an improvement in sales volume in model mix, the positive impact of ForEx as well as other factors, which more than offset the negative impact of an increase in SG&A costs. Operating income for the other regions category, which includes South America, [the near Middle East], Africa and Oceania was JPY8.6 billion, a decrease of 33.2%, mainly due to an increase in SG&A expenses and the negative impact of currency effects as well as other factors.

Please turn to slide 26. For your reference, this slide highlights the financial results for the full fiscal year by geographic region.

Please turn to the next slide. Equity in income of affiliates. Equity in income of affiliates for the fourth quarter amounted to JPY36.6 billion, a decrease of 1.9% mainly due to intense competition in the Chinese market as well as other factors. Equity in income of affiliates in Asia totaled JPY30.4 billion.

Please turn to slide 28. Capital expenditures, consolidated capital expenditures for the full fiscal year amounted to JPY657.9 billion, a decrease of JPY68.2 billion compared to the previous year, mainly due to a decrease in investment per plant and equipment within automobile business operations. For your reference, increases and decreases in capital expenditures by business segment excluding the impact of currency translation effects are as shown the attached chart. We will now explain the unit sales forecasts for each business segment for fiscal 2016.

Please turn to slide 30. Group unit sales forecast, the Honda Group unit sales forecast is as follows. Motorcycle business operations, 18,225,000 units. Automobile business operations, 4,715,000 units, Power product business operations, 6,360,000 units.

Please turn to the next slide. The Honda consolidated unit sales forecast by business segment is as follows. Motorcycle business operations, 11,075,000 units; automobile business operations, 3,715,000 units. Power Product business operations, 6,360,000 units.

Please turn to slide 32. We would now like to once again highlight the updated fiscal 2016 consolidated financial forecast. Operating profit, JPY685 billion. Profit before income taxes, JPY805 billion. Profit for the year attributable to owners of the parent, JPY525 billion. The increase and decrease factors behind the changes from the previous fiscal year and the fiscal 2016 forecasts are shown based on US GAAP in the profit walk stimulation shown on slide 33. Changes in sales volume and model mix, other, plus JPY167.3 billion. Costs down, other, plus JPY60 billion. SG&A increase, minus JPY90 billion. R&D increase, minus JPY44 billion. On the operating profit level, excluding the negative impact of currency fluctuations from emerging countries, an increase of JPY93.3 billion is forecast. ForEx effects, minus JPY85 billion. Other income and expenses minus JPY47.9 billion.

Next, we would like to explain the increase and decrease factors between US GAAP and IFRS fiscal 2016 forecasts. On the operating profit level, plus JPY25 billion. A change in how the equity and income of affiliates is categorized, plus JPY135 billion. Other, minus JPY5 billion.

Please turn to slide 34. Finally, we would like to highlight our fiscal 2016 forecast for capital expenditures, depreciation costs and R&D expenses. Capital expenditures are foreseeing to be the same as the previous fiscal year. Incorporating currency translation effects, the CapEx forecast is JPY670 billion. The forecast for depreciation costs and amortization is JPY455 billion. R&D expenses include provisions for environmental and safety-related development activities. Incorporating currency translation effects, the R&D forecast is JPY720 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.