本田技研 (HMC) 2019 Q1 法說會逐字稿

Welcome to the Honda financial results presentation for the fiscal first quarter of fiscal year 2019.

We would like to begin our fiscal year 2019 first quarter results presentation.

We would like to first review the financial summary for the first quarter of fiscal year 2019.

Operating profit for the first quarter of fiscal year 2019 was JPY 299.3 billion, achieving an increase by 11.2% compared to the same period last fiscal year.

Despite the effects of the flooding in Mexico and the negative impact of ForEx effects, the increases in automobile sales in North America and motorcycle sales in Asia, combined with a decrease in SG&A expenses and effects of the cost reduction initiatives, contributed to the rise in the operating profit.

Profit for the period attributable to owners of the parent for the quarter was JPY 244.3 billion, an increase by 17.8% compared to the same period a year earlier.

We would now like to review Honda's business results for the quarter in some major markets around the world.

In Japan, automobile sales totaled 167,000 units, a 5.8% increase compared to the same period last year.

Cumulative sales of the N series models reached the 2 million unit milestone, with the N-BOX series successfully becoming the top-selling model for new car sales in Japan for the first half of calendar year 2018.

In July, the N-VAN and the Clarity PHEV models were launched.

In the U.S. market, Honda achieved automobile sales of 425,000 units, virtually unchanged from the same period last year.

In June, the Acura RDX and Insight models were launched.

In China, automobile sales totaled 321,000 units, a decline of 6.4% from the same period a year earlier.

Cumulative sales in China reached the 10 million unit milestone.

In May, the fully remodeled Accord was launched.

Turning now to motorcycle operations.

Motorcycle sales totaled 1.69 million units in India, which is a key market, marking an increase by 14.3% compared to the same period last year.

In June, the Dio and the CD 110 Dream Deluxe models were launched.

We would now like to touch on some of our most recent news topics.

In June, Honda reached an agreement on a business partnership with General Motors for next-generation advanced battery components, including the battery cells and modules.

In July, Honda and Panasonic Corporation announced that they would start conducting a joint research experiment on battery sharing using detachable mobile batteries in electric motorcycles, among other electric-powered means of transportation.

The joint research experiment is scheduled to begin in Indonesia in December of 2018.

The power product business announced that its general purpose GCV engine series underwent a full lineup change for launch in June.

While retaining the series' outstanding fuel efficiency performance, further improvements in combustion technologies achieve the highest power output and torque levels in the class.

In May, the new HondaJet Elite was introduced, with the aircraft obtaining the highest levels in the class for its top speed, fuel efficiency performance and cruising range, among other features.

We will now take a look at our financial forecast for fiscal year 2019 on a consolidated basis.

By incorporating the effects of the flooding in Mexico, the reductions in SG&A expenses and the impact of ForEx fluctuations, we have revised our consolidated results forecast from our previous announcement as follows: we now expect sales revenue of JPY 15,450,000,000,000; we plan on an operating profit of JPY 710 billion, an increase by JPY 10 billion compared to the previous forecast; we expect the share of profit of investments accounted for using the equity method to be JPY 215 billion.

Regarding profit for the period attributable to owners of the parent, our target is JPY 615 billion.

The exchange rates set for calculating these projections were JPY 109 to USD 1 for the first half and JPY 105 to USD 1 for the second half.

The average full year exchange rate was set at JPY 107 to USD 1. As for dividends, the annual expected dividend for fiscal year 2019 would be unchanged from our previous announcement, at JPY 108 per share of common stock.

The dividend for the first quarter would be JPY 27 per share of common stock.

We will now provide more detailed explanations on the company's financial results and outlook.

First of all, we will review the Honda Group's unit sales for the first quarter.

In Motorcycle Business operations, group unit sales totaled 5,352,000 units.

In Automobile Business operations, group unit sales totaled 1,305,000 units.

In Power Product Business operations, group unit sales totaled 1,341,000 units.

Regarding the profit and loss situation, sales revenue increased in every business segment, resulting in a total of JPY 4,024,100,000,000, an increase by 8.4% compared to the same period a year ago.

Operating profit amounted to JPY 299.3 billion, an increase of 11.2% compared to the same period last fiscal year, primarily due to an increase in profit associated with volume and model mix as well as a decrease in SG&A expenses, among other factors.

The operating margin was 7.4%.

The share of profit of investments accounted for using the equity method was JPY 54.3 billion.

Profit before income taxes totaled JPY 358.2 billion.

Quarterly profit for the period attributable to owners of the parent totaled JPY 244.3 billion, an increase by 17.8% compared to the same period a year earlier.

Regarding Honda Group unit sales for each segment.

Motorcycle sales totaled 5,352,000 units, a 13.9% increase compared to the same period last year, thanks mainly to the rise in sales in Indonesia, India and Vietnam, among other countries.

For automobile operations, increases in sales of the Pilot in the U.S. as well as N-BOX in Japan were among the primary drivers of unit growth to 1,305,000 units, a 3% increase compared to the same period last year.

For the power products business operations, a decrease in sales of OEM engines in the U.S. market was more than offset by an increase in the sales of generators in the U.S. as well as an increase in sales of OEM engines in China, among other factors, leading to a total of 1,341,000 units, an increase by 0.8% compared to the same period a year earlier.

Now regarding sales revenue for the fiscal first quarter.

Despite the negative impact of foreign currency translation effects, every business segment realized an increase in revenue, resulting in total sales revenue of JPY 4,024,100,000,000.

Next, we would like to provide explanations on the increase and decrease factors that impacted profit before income taxes for the quarter.

Profit before income taxes totaled JPY 358.2 billion, an increase by JPY 23.2 billion compared to the same period a year earlier.

Operating profit totaled JPY 299.3 billion, a JPY 30.1 billion increase compared to the same period last year.

A look at the increase and decrease factors shows that for the operating profit with ForEx effects excluded, despite negative effects of the flooding in Mexico, an increase in profit associated with volume and model mix as well as a decrease in SG&A expenses, among other factors, resulted in a positive impact of JPY 55.8 billion.

At the operating profit level, the negative impact from ForEx effects was JPY 25.6 billion.

An increase in the share of profit of investments accounted for using the equity method resulted in a positive impact of JPY 1.3 billion.

Finance income and finance costs resulted in a negative impact of JPY 8.2 billion.

We would now like to discuss the results for each business area.

In Motorcycle Business operations, an increase in profit associated with volume and model mix as well as other factors led to the operating profit of JPY 92.1 billion, a 16.9% increase compared to the same period a year earlier.

In Automobile Business operations, a decrease in SG&A expenses combined with an increase in profit associated with volume and model mix, among other factors, resulted in the operating profit of JPY 151.6 billion, an increase by 8.1% compared to the same period a year earlier.

Regarding the operating loss for Power Product and Other Businesses, a rise in expenses involving the other businesses led to a total loss of JPY 1.6 billion, a deterioration of JPY 1.7 billion compared to the same period a year ago.

The operating loss for aircraft and aircraft engine business operations, which are included in the Power Product and Other Business segment, totaled JPY 10 billion, a deterioration of JPY 1.4 billion compared to the same period last year.

In Financial Services Business operations, the operating profits totaled JPY 57.1 billion, an increase by 14.7% compared to the same period a year ago, thanks mainly to an increase in profits associated with higher operating lease revenues.

We would now like to review Honda's business results for the first quarter by geographical region.

In Japan, despite a rise in profit related to an increase in volume and model mix, among other factors, the negative impact of ForEx effects, an increase in R&D expenses and other factors resulted in an operating profit of JPY 14.7 billion, a decrease by 31.7% compared to the same period a year earlier.

In North America, the negative effects of flooding in Mexico were more than offset by a rise in profit resulting from an increase in automobile unit sales, among other factors, leading to the operating profit of JPY 110.3 billion, an 8.6% increase compared to the same period last year.

For Europe, the effects of cost reduction initiatives and other factors resulted in an operating profit of JPY 7.0 billion, an increase by 5.7% compared to the same period a year earlier.

In Asia, an increase in profit thanks to increases in unit sales for motorcycles and automobiles and positive effects of the cost reduction efforts, among other factors, led to an operating profit of JPY 122.5 billion, a 25.2% increase compared to the same period last year.

In other regions, which includes South America, the Middle East, Africa, Oceania and other areas, an increase in profit related to volume and model mix and other factors resulted in an operating profit of JPY 22.6 billion, an increase by 53.7% compared to the same period a year ago.

Now regarding the share of profit of investments accounted for using the equity method, this amounted to JPY 54.3 billion for the quarter, a 2.6% increase compared to the same period last year.

This was mainly because of the recognition of impairment losses on investments for certain affiliated companies in Japan during the same period a year ago.

Consolidated capital expenditures for the fiscal first quarter amounted to JPY 96.5 billion, an increase of JPY 18.6 billion compared to the same period a year ago, mainly due to an increase in expenditures associated with new model introductions and automobile business operations.

We would now like to discuss Honda's consolidated results forecast for fiscal year 2019, beginning with Honda Group unit sales for each of the business areas.

In Motorcycle Business operations, a rise in sales, mainly in Asia, has been incorporated for an expected increase by 305,000 units compared to the previous forecast, bringing projected unit sales to 20,850,000 units.

In Automobile Business operations, the effects of the flooding in Mexico and other factors have been incorporated for a projected decrease of 90,000 units, bringing the forecast to a total of 5,285,000 units.

In Power Product Business operations, Honda Group unit sales forecast is 6,345,000 units, reflecting an expected increase of 55,000 units.

The consolidated unit sales forecast for each business segment is as shown here.

The consolidated full year earnings forecast, which we explained earlier, is as shown here.

The increase and decrease factors for this consolidated fiscal year forecast compared to the results of the previous fiscal year are as follows: operating profit, JPY 123.5 billion minus; share of profit on investments accounted for using the equity method, JPY 32.6 billion minus; finance income and finance costs, JPY 28.7 billion minus.

The weak Argentina peso included in currency effects reflects expected inflationary effects, so it is excluded from real-term currency effects, and the projected real-term currency effect for this fiscal year is JPY 178.0 billion.

The next slide helps to illustrate actual company performance by rearranging the order of the increase and decrease factors impacting operating profit.

Excluding real-term currency effects, onetime issues and raw material price increases, a real-term profit increase of JPY 140.5 billion is projected.

Compared to our previous financial forecast for the current fiscal year, we have reflected an increase in operating profit of plus JPY 10 billion.

If the impact of Mexico plant flooding, raw material price increases and real-term currency effects are excluded, this would result in a plus JPY 61.0 billion increase.

Finally, our projected capital expenditures, depreciation and R&D expenditures for fiscal year 2019 are as shown here.

This concludes our financial results presentation.

Thank you very much for your continued interest in Honda's activities.