本田技研 (HMC) 2017 Q1 法說會逐字稿

2017 first quarter financial results. Welcome to the Honda financial results audio presentation. On August 2, 2016 Honda Motor Company announced its financial results for the fiscal first quarter which ended on June 30, 2016. 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 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 summary for the fiscal first quarter which ended on June 30. Please refer to slide three. Fiscal first quarter topics. To begin, we would like to introduce you to some of the news topics from the fiscal first quarter. The first delivery of the new NSX supercar took place in May. Featuring a direct injection twin-turbocharged DOHC V6 engine in a midship layout and equipped with sport hybrid SH-AWD, the highly efficient high-output three motor hybrid system, the NSX delivers incredible precision crafted performance to bring new value to the supercar segment.

In June, sales of the new Ridgeline began in North America. In the midsize pickup truck segment, the Ridgeline delivers class leading payload capacity and dynamic performance and is available with the world's first truckbed audio system.

Following its introduction in North America last November and Thailand in January, the global launch of the fully remodeled Civic continued with sale starting in China and Malaysia in the first quarter. In June, the startup of the number two line at Honda's fourth motorcycle plant in India took place in the state of Gujarat. The factory is dedicated mainly to the production of the popular Activa model and brings Honda's annual motorcycle production capacity in India up to 5.8 million units. Activa was the number one selling two-wheeler modeled in India for the first six months of this year.

This concludes the news topics overview. Next I would like to review the financial results for the fiscal first quarter.

Please refer to slide four. In overview, the fiscal first quarter was negatively impacted by ForEx currency effects associated with the strengthening of the yen and the 2016 Kumamoto earthquake. However, the positive effect of new model introductions, full model changes of existing models, cost reduction efforts and a decline in quality-related expenses resulted in operating profit of JPY266.8 billion, an 11.5% increase from the same period a year ago.

Please turn to the next slide. With respect to Honda Group unit sales, motorcycle business operations recorded a decline in unit sales in Brazil and other markets but large gains in Asia, especially India, resulted in a total of 4,352,000 units, an increase of 6.0% compared to the same period last year. Within automobile business operations, robust sales in China as well as higher unit sales in North America and Europe, due to new model introductions and full model changes of existing models, led to a total of 1,213,000 units, a 5.8% increase. In power product business operations, a decrease in sales, predominantly in North America and Japan, resulted in total sales of 1,488,000 units, a decrease of 4.5%. The consolidated unit sales totals for the respective business unit areas are as shown.

Please turn to slide six. Financial highlights for the first quarter. Sales revenue totaled JPY3,471.7 billion, a 6.3% decrease compared to the same period last year. This was primarily due to the negative impact of foreign currency translation effects, despite a rise in consolidated automobile and motorcycle unit sales and other positive factors. Operating profits rose to JPY266.8 billion, an 11.5% increase. This was mostly due to the positive impact of cost reduction efforts; higher revenues associated with a positive change in revenue and model mix; a decline in SG&A expenses, including quality related costs; and other factors, despite the negative impact of ForEx fluctuations.

The operating margin was 7.7%. Share of profit from investments accounted for using the equity method amounted to JPY27.2 billion. Profit before income taxes totaled JPY288.4 billion. Profit for the period attributable to owners of the parent for the quarter was JPY174.6 billion. EPS for the quarter totaled JPY96.93. Average exchange rate for the quarter was JPY108 to the dollar, JPY13 higher than a year earlier.

Please turn to the next slide. Financial forecast for fiscal year 2017. With respect to our financial forecast for the current fiscal year, first-quarter results were boosted by strong sales in automobile business operations and other factors, which put us ahead of our plan at this stage of the fiscal year. However, upon consideration of the fact that certain expenses have been deferred to later in the fiscal year, a continuing uncertainty regarding currency fluctuations through the remainder of the fiscal year as well as unpredictable market conditions and other variables, we have not changed our consolidated results forecast from our previous announcement.

Please turn to slide eight 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 year 2017 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 10. Regarding Honda's group unit sales for the first quarter, lower sales, predominantly in China and Brazil, were more than offset by robust scooter model sales in India, Vietnam, the Philippines and other markets, resulting in a total of 4,352,000 units, an increase of 6.0% compared to the same period of the previous year.

Please refer to the next slide. Within automobile business operations, higher unit sales, mainly in North America and Europe, due to new model introductions and full model changes of existing models as well as robust sales in China, led to a total of 1,213,000 units, a 5.8% increase.

Please turn to slide 12. Group unit sales and power product business operations totaled 1,488,000 units, a decline of 4.5%, due to lower OEM engine unit sales in North America and Japan.

Please turn to slide 13. This slide highlights the financial results for the fiscal first quarter by business segment. Sales revenue totaled JPY3,471.7 billion, a 6.3% decrease compared to the same period last year. This was primarily due to the negative impact of foreign currency translation effects, despite a rise in consolidated automobile and motorcycle unit sales and other positive factors. The increases and decreases in sales revenue for the respective business segments, excluding the negative currency effect of JPY401.0 billion, are as shown in the chart in the center of the slide.

Please turn to slide 14. 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 JPY288.4 billion, an increase of JPY6.1 billion compared to the same period last year. Operating profits amounted to JPY266.8 billion, an increase of JPY27.5 billion.

Now I would like to elaborate on the increase and decrease factors impacting profit before income taxes. With respect to revenue and model mix, a change in unit volume and model mix resulted in a positive impact of JPY45.1 billion. Regarding cost down effects, changes in material costs and cost reduction efforts resulted in a positive impact of JPY45.7 billion.

With respect to SG&A expenses, a reduction in quality-related costs and other factors resulted in a positive impact of JPY36.8 billion. An increase in R&D expenses had a negative impact of JPY24.3 billion. At the operating income level, the negative impact of currency effects from the yen to dollar exchange rate, the US dollar versus the Brazilian real, the Canadian dollar, the Mexican peso and other currencies, as well as the negative impact of the yen versus major Asian currencies resulting in a negative impact of JPY75.8 billion. Share of profit investments accounted for using the equity method resulted in a negative impact of JPY11 billion. Finance income and finance costs resulted in a negative impact of JPY10.2 billion.

Business segment. Please refer to slide 15. Next I would like to discuss the first-quarter results for each business area. In motorcycle business operations, an increase in consolidated unit sales and other positive factors were more than offset by the negative impact of foreign currency translation effects, resulting in total sales revenue of JPY432.4 billion, an 8.5% decline. Cost reduction efforts and other positive factors were more than offset by the negative impact on sales volume and model mix due to the 2016 Kumamoto earthquake, the negative impact of ForEx effects and other factors resulting in operating profit of JPY31.1 billion, a 43.9% decline from the same period a year ago. Operating margin was 7.2%.

Please turn to the next slide. Next we would like to discuss automobile business operations. Sales revenue declined to JPY2,536.1 billion, a decrease of 6.3%, primarily due to the negative impact of foreign currency translation effects and other factors, despite an increase in consolidated unit sales and other positive factors.

With respect to operating profits, an increase in revenue associated with sales volume and model mix, lower SG&A expenses, including quality-related costs, cost reduction efforts and other factors more than offset the negative impact of ForEx effects as well as other factors, resulting in a total of JPY184.5 billion, a 41.1% increase compared to the same period of the previous year. Operating margin was 7.3%.

Please refer to slide 17. In the power products and other businesses segment, a decline in consolidated unit sales and other factors resulted in sales revenue of JPY80.9 billion, a decline of 8.3% compared to the same period last year. Despite a decline in revenue associated with sales volume and model mix and other negative factors, a decline in expenses related to other businesses led to operating profits of JPY500 million, an increase of 2.9% compared to the same period a year ago. The operating margin was 0.7%. Operating loss associated with aircraft and aircraft engines, which is included in power products and other businesses, totaled JPY8.8 billion, an improvement of JPY3.2 billion compared to the same period a year ago.

Please turn to slide 18. In the financial services business segment, the total assets of finance subsidiaries at the end of the first quarter totaled JPY8,538.3 billion. Sales revenue totaled JPY467.9 billion, a decrease of 1.9%, primarily due to the negative impact of foreign currency translation effects despite the positive impact of a rise in operating lease revenues and other factors. Operating profits totaled JPY50.5 billion, a decrease of 3.6%, mainly due to the negative impact of foreign currency effects and other factors. Operating margin was 10.8%.

Geographical region. Please refer to slide 19. Next we would like to review Honda's business results by geographical region for the quarter. In Japan, lower SG&A expenses, including quality-related costs, the positive impact of cost reduction efforts and other factors, were more than offset by the negative impact of ForEx effects, an increase in R&D expenses and other factors resulting in an operating loss for the quarter of JPY19.7 billion, a decrease of JPY47.5 billion compared to the same period last year.

Operating profits in North America for the quarter amounted to JPY171.2 billion, an increase of 57.1%, due mainly to the positive impact on sales volume and model mix, cost reduction efforts, a decrease in SG&A expenses, including quality-related costs and other factors which more than offset negative currency effects, as well as other factors. In Europe, operating profits amounted to JPY1.2 billion, an improvement of JPY2.2 billion compared to the same period last year. This was primarily due to the positive impact on sales volume and model mix as well as other factors.

Operating profits in Asia totaled JPY90.3 billion, a decrease of 5.5% compared to the same period last year. This was mostly due to the negative impact of currency effects, which more than offset cost reduction efforts and other factors. Operating income for other regions, which includes South America, the Near and Middle East, Africa as well as Oceania, was JPY14.3 billion, an increase of 218.1%. The increase was primarily due to a decrease in SG&A expenses and cost reduction efforts, which more than offset lower revenue associated with sales volume and model mix, negative ForEx effects and other factors.

Please turn to slide 20. Share of profits from investments accounted for using the equity method. Share of profits from investments accounted for using the equity method amounted to JPY27.2 billion, a decrease of 29%. This increase was predominantly due to the realization of impairment losses on investments for certain affiliated companies in Japan of JPY12.8 billion, despite 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 JPY39.3 billion, as indicated at the bottom of the slide.

Please refer to slide 21. Capital expenditures. Consolidated capital expenditures for the first quarter amounted to JPY101.2 billion, a decrease of JPY62.9 billion compared to the same period a year ago, mainly due to a decrease in automobile and motorcycle business 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.

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.