本田技研 (HMC) 2016 Q1 法說會逐字稿

Welcome to the Honda financial results audio presentation. On July 31, 2015 Honda Motor Company announced its financial results for the fiscal first quarter, which ended on June 30, 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 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 207A 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.

Before discussing details of the fiscal 2016 first-quarter results, which are based on international financial reporting standards or IFRS, please note that for the purpose of comparison, the fiscal 2015 results shown in this presentation have been restated based on IFRS.

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 profits for the first quarter were JPY239.2b, a 16.4% increase compared to the same period last year. This was mainly due to strong sales in North America, the positive effect of the HR-V launch as well as the positive impact of cost reduction efforts, which more than offset an increase in SG&A expenses, including quality-related costs.

Please turn to the next slide. With respect to Honda Group unit sales, motorcycle business operations realized higher sales in India and other countries, but this was more than offset by declines in Indonesia and South America, resulting in a total of 4.105m units or a 5.7% decrease compared to the same period last year.

Within automobile business operations, sales declined in Japan, but higher unit sales in North America and China led to total of 1.147m units, a 4.9% increase.

In power product business operations, an increase in sales in North America was more than offset by declines in China and Thailand, resulting in Group unit sales of 1.558m, a decrease of 1.2%.

The consolidated unit sales totals for the respective business areas are as shown.

Please turn to slide 5, financial highlights for the first quarter. Sales revenue totaled JPY3,704.7b, a 15.5% increase compared to the same period last year. This was primarily due to a rise in automobile sales, higher revenues in the financial services business segment as well as the positive impact of foreign exchange fluctuations and other factors.

Operating profits rose to JPY239.2b, a 16.4% increase. This was mostly due to higher income associated with a positive change in revenue and model mix, the positive impact of cost reduction efforts as well as other factors, which more than offset a rise in SG&A expenses, including quality-related costs and other factors. The operating margin was 6.5%.

Share of profit from investments, accounted for using the equity method, amounted to JPY38.3b. Profit before income taxes totaled JPY282.3b. Profit for year attributable to owners of the parent for the quarter was JPY186b. EPS for the quarter totaled JPY103.22. Average exchange rate for the quarter was JPY121 to the dollar, JPY19 lower than a year earlier.

Please turn to the next slide, financial forecast for fiscal 2016. With respect to our financial forecast for the current fiscal year, positive ForEx effects and other factors contributed to progress which exceeded our plan. However, due to certain indefinite factors, such as currency fluctuations hereafter, quality-related costs and other variables, we have not changed our consolidated results forecast from our previous announcement.

Please turn to slide 7 for information on the dividend. Unchanged from our previous announcement, the first-quarter dividend is expected to be JPY22 per common stock. The annual dividend for fiscal 2016 is expected to be JPY88 per common stock.

Sales revenue and operating profit 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 sales and financial services business revenue along with other factors combined with a positive impact from ForEx translation effects led to sales revenue of JPY3,704.7b. The increases and decreases in sales revenue for the respective business segments, excluding the positive currency effect of JPY377.6b, are as shown.

Please turn to slide 10. Next we would like to explain the positive and negative factors, which impacted profit before income taxes for the first quarter. Profit before income taxes was JPY282.3b, an increase of JPY38.7b compared to the same period last year. Operating profits amounted to JPY239.2b, an increase of JPY33.7b.

Now I would like to elaborate on the increase and decrease factors impacting sales. With respect to revenue and model mix, a change in unit volume and model mix resulted in a positive impact of JPY46.7b. Regarding cost reduction efforts and changes in material costs, a positive impact of JPY27.5b was realized. An increase in SG&A expenses, including a rise in quality-related costs, had a negative impact of JPY47.6b. An increase in R&D expenses had a negative impact of JPY2.7b.

At the operating income level, the negative impact of currency effects from the US dollar versus the Brazilian real, the Canadian dollar, the Mexican peso and other currencies was more than offset by the positive effect of the yen/dollar exchange rate, resulting in a positive impact of JPY9.8b. Share of profit of investments accounted for using the equity method resulted in a positive impact of JPY2b. Finance income and finance costs resulted in a positive impact of JPY2.8b.

Business segment. Please turn to slide 11. Next I would like to discuss the first-quarter results for each business area. In motorcycle business operations Group unit sales increased in India as well as some other regions, but the negative impact of the decline in Indonesia, South America and other areas led to total Group unit sales of 4.105m, a 5.7% decline.

Please turn to the next slide. An increase in consolidated unit sales and the positive impact of ForEx translation effects resulted in sales revenue of JPY472.7b, an increase of 10.8%. Operating profits increased to JPY55.5b, an increase of 33.4% compared to the same period last year. This was primarily due to an increase in income related to sales volume and model mix and cost reduction efforts as well as other factors, which more than offset the negative impact of ForEx effects and other factors. The operating margin for the quarter was 11.8%.

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 Japan, but sales increased in North America and other countries, and a positive effect generated by the introduction of the Vezel and XR-V in China along with other factors, led to a total of 1.147m units, an increase of 4.9%.

Please turn to the next slide for financial highlights on this business segment for the quarter. Sales revenue grew to JPY2,706b, an increase of 14.8%, primarily due to the positive impact of ForEx fluctuations and other factors, despite a decrease in consolidated unit sales and other factors.

With respect to operating profits, higher SG&A expenses, including quality-related costs and other factors, were more than offset by an increase in income associated with sales volume and model mix, continued cost reduction efforts and the positive impact of ForEx effects as well as other factors, resulting in a total of JPY130.7b, an 18% increase compared to the same period of the previous year. Operating margin was 4.8%.

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 North America due to robust OEM engine sales, but lower OEM engine sales in China as well as other factors had a negative impact on overall sales in the segment, resulting in a total of 1.558m units, a decrease of 1.2%.

Please turn to the next slide. In the power products and other business segments a positive impact from ForEx translation effects as well as other factors led to sales revenue of JPY88.1b, an increase of 5.9% compared to the same period last year. Operating profits declined to JPY500m, a decrease of 84.6%, primarily due to a rise in expenses associated with other businesses, the negative impact of ForEx translation effects as well as other factors. The operating margin was 0.6%.

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 JPY9,560.2b. Sales revenue totaled JPY476.8b, a rise of 30%, primarily due to the positive impact of a rise in operating lease revenues, an increase in sales of returned lease vehicles, positive currency effects as well as other factors. Operating profits totaled JPY52.4b, an increase of 5.7%, mainly due to positive currency effects, despite higher SG&A expenses and other factors. Operating margin was 11%.

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 positive ForEx effects and other factors were more than offset by a decrease in revenue related to volume and model mix, higher SG&A expenses, including increased quality-related costs, as well as other factors, resulting in operating profits for the quarter of JPY27.8b, a 55.8% decrease compared to the same period last year.

Operating profits in North America for the quarter amounted to JPY109b, an increase of 63.5%, due mainly to the positive impact on sales volume and model mix, despite an increase in SG&A expenses, including quality-related costs, negative currency effects as well as other factors.

In Europe operating losses amounted to JPY900m, a decrease of JPY2.7b. This was primarily due to the negative impact on sales volume and model mix, negative ForEx effects as well as other factors.

Operating profits in Asia totaled JPY95.5b, an increase of 38.5% compared to the same period last year. This was mostly due to the positive impact on sales volume and model mix, cost reduction efforts, positive currency effects and other factors, which more than offset an increase in SG&A expenses and other factors.

Operating income for other regions, which include South America, the Near and Middle East, Africa as well as Oceania, was JPY4.5b, a decrease of 47.2%. The decrease was primarily due to an increase in SG&A expenses and the negative impact of ForEx effects, which more than offset an increase in sales volume and model mix, cost reduction efforts and other factors.

Please turn to slide 19, share of profits from investments accounted for using the equity method. Share of profits from investments accounted for using the equity method amounted to JPY38.3b, an increase of 5.7%. This increase was predominantly due to an increase in unit sales in China as well as other factors. Share of profits from investments accounted for using the equity method in Asia totaled JPY32.5b, as indicated at the bottom of the slide.

Please refer to slide 20. Capital expenditures. Consolidated capital expenditures for the first quarter amounted to JPY164.1b, an increase of JPY27.7b, mainly due to an increase in automobile operation expenditures, currency translation effects and other factors. For your reference, increases and decreases in capital expenditures by business segment, excluding the impact of currency translation effects, are as shown.

The fiscal 2016 consolidated results forecast remains unchanged since our previous forecast. For an IFRS-based comparison with the previous fiscal year please refer to the appendix attached at the end of the presentation.

This concludes our financial result 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.