本田技研 (HMC) 2008 Q2 法說會逐字稿

Good morning. My name is Judith and I'll be your conference Operator today. At this time I would like to welcome everyone to the Honda Motor second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. (OPERATOR INSTRUCTIONS).

This conference call 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 assumptions and beliefs, taking into account information currently available to it.

Therefore, Honda's actual results could materially differ from those described in such 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 U.S. dollar, the euro and other major currencies, as well as other factors detailed from time to time.

Thank you. It is now my pleasure to turn the call over to your host, Mr. [Taku Gitamora].

Thank you. Good morning, everybody. Thank you for joining Honda's second quarter's earnings conference call. Honda just announced its consolidated financial results for second quarter which ended September 30, 2007, and forecasts for the year ending March 2008. And in this conference call we will discuss about the contents of the results and new guidance for the entire fiscal year. And later on we will invite questions from the participants.

And I would like to introduce today's speakers from Japan. First, Honda Motor's CFO, Ike San.

Hello, good morning, everyone.

And General Manager of Finance division, Mr. [Take San]

Hello. Good morning, everybody.

And the Honda IR division, Mr. Oshima. Oshima San.

Hello there. How are you? Thanks for joining the conference everyone.

And, also from Honda, Honda Motor IR, Mr. Sugiama. Sugiama San.

Hello everyone.

And also a new speaker this time from also Honda IR, [Mr. Okumichi]. Okumichi San.

Good morning, everyone.

And, also from Honda Motor Europe, [Mrs. Okamoto]. Okamoto San.

She is coming back soon.

Okay. I will wait. And also we have, as usual, guest analyst from Cleveland, Ohio, [Mr. Doug]. (Spoken in Japanese).

Morning, Gitamora San. Good morning, everyone.

Morning. So, also I would like to remind you that material we are going to use in this conference call you may download that from the following website, which is http://world.honda.com/investors/financialresult/.

And so I would like start with the quick overview of second quarter's financial results. Please take a look at slide number three. Starting from the sales unit, for Motorcycle sales unit is 2,333m units, which is 17.2% decrease.

And for Automobiles, sales unit was 937,000 units, which is 6.0% increase.

And, also Power Products business, sales unit was 1,258m, which is 6.0% increase.

And the revenue and profit information, revenue was, mainly due to the increased unit sales from Automobile business, and the favorable foreign exchange rate, the total revenue was JPY2,971.3b, which is 12.9% year over year.

And the operating profit was JPY286.3b, which was 48.3% increase.

And income before income taxes was JPY269.9b, which was 65.0% increase.

And equity in income of affiliates was JPY26.2b, which was 4.4% decrease.

And the net profit was JPY208.4b, which was 63.0% increase.

And effective tax rate for the second quarter was 30.1%, which was down 5.6% from the corresponding period, period of last fiscal year. This is due to the increase of profit in lower tax rate countries subsidiaries.

And the EPS was JPY114.94b, which was JPY44.89 increase.

And the status of this second quarter's results, as far as revenue, again due to the increasing Automobile sales units, it's posted a record high the second quarter. And the, -- due to the improvement of operating margin in every regions, operating profit income before tax and net profit also record high for second quarter.

And overall business environment surrounding Honda this second quarter, free exchange rate compared to first quarter of this fiscal year, yen started to appreciate. But overall second quarter's foreign exchange rate was basically JYP2 weaker compared to corresponding period of last fiscal year.

And raw material price and gas price continued to be higher level.

And the environment for each business wise for Motorcycles business, the market in Brazil continued to grow. And -- but overall environment for global market for motorcycle becoming much tougher and tougher.

And for the Automobiles so called BRICKS, like Brazil, Russia, India or China, those so called emerging market continued to grow. But automobile market environment for Japanese market, domestic market, still very tough.

And, as for the total demand for U.S., compared to last fiscal year, the same period, which was down. So, as for Automobile business environment is also becoming much tougher than before.

So before we get into much detail, we would like to invite Ike San to make a comment about the characteristics of the second quarter's results. Ike San.

Yes. Thank you, Gitamora San. Well, to summarize the second quarter results, in short I would say key term is the global sales incrementation, especially very strong accept of and the popularity of the CR-V, not only the U.S. market but I would say globally. So this incrementation continues to be a very big volume growth.

And, also, in the past, the emerging markets like Asia or Brazil, contribution came from the mainly Motorcycle business. But, now, even Brazil or Asian countries, Automobile business segment become a large contributor to profits by incrementation. So, after each introducing the CR-V, those volume increase contributed to the profit.

And, also, I would like to mention that this, despite the weaker yen against the U.S. dollar, especially for the second quarter, against the previous forecast of 121 for the second quarter, actual prevailing rate was 181. So JPY3 weaker negatively affected our profit income -- profit level.

However, thanks to the materialization of cost of reduction, so especially for the -- our suppliers, and in the process of introducing, or launching, new models like this new Accord. So the negative impact of the weaker yen -- I am sorry, stronger yen, was offsetted by the contribution of the cost down.

So, again, I would say only one region the profit was not really contributing towards the Japanese domestic market. But, outside Japan, almost every region we witnessed the -- well, we enjoyed the very good contribution through the Automobile operation.

Thank you very much, Ike San. So, okay let's go into detail, starting from the sales units by each business segment.

So Oshima San, could you elaborate those sales, starting from units of sales?

Okay. Starting from the second quarter Motorcycle unit sales we see in slide 10. 2,333m units. Y-o-Y increased by 483,000, 17.2%. Increased sales in (South America) but decreased knockdown component segment for local production by Indian Joint Venture affiliate because of increased [local procurement].

Then, slide 11, Automobile unit sales. 937,000 units increased by 53,000, 6.0%. Favorable CR-V sales globally and the FFV sales increased in Brazil.

And then slide 12, Power Products unit sales. 1,258,000 units increased by 6%. Sales increased in Japan, Europe, Asia and other regions.

Okay. The revenue, as I explained, was for JPY2,971.3b, which was 12.9% increase. So Mr. Okumichi, Okumichi San, could you explain the -- what is a key driver for this increased revenue?

Yes. Let's look at slide 13, revenues by business segment. JPY2,971.3b increased Y-o-Y 12.9%. Changes in revenue, excluding currency fluctuation effects, each business segment as you see. Automobile sales increased in North America and Europe.

Okay. Let's go to operating profits line. And operating profit was JPY286.3b, which was a 48.3% increase compared to the corresponding period of last fiscal year. So, considering the revenue increase was 12.9%, but operating profit increase was much higher than that, so could you elaborate this change in size please, as usual?

Please look at slide 15 for, Y-o-Y, changes in operating income. First is that despite increased sales incentives in North America, revenue model mix increased by JPY105.1b from higher revenue and the realized gain from changing the inventories.

Then, cost reduction decreased JPY11.8b despite our cost reduction efforts increasing raw material prices and the increases in depreciation in manufacturing ops.

And SG&A increased JPY15.8b. Increased sales expenses, storage fees due to unit sales increases and the increased expenses for advertising sales and sales promotion.

And the R&D increased JPY11.1b.

And currency effects at the operating income increases JPY27b.

Okay, can you explain the for the cost down was JPY11.8b minus. Could you explain the breakdown of this amount?

Breakdown?

Okay. Impact of soaring raw material was JPY13b, but our cost reduction effort overcame that. And, including other factors, depreciation and labor expenses, total is minus JPY11.8b.

Okay. Thank you very much. Okay, so Doug San, do you have any question about the changing factors in income before income taxes?

Yes. Thanks, Gitamora San. If we look at slide 16, we notice that from 15, slide 15, that currency is an increasing -- increasingly important traffic contributor into the traffic increase. Then, if I look at slide 16, and I notice that income from currencies, other than the dollar and the euro, it's increasing. Can you expand on that please?

Hello Doug San. This is Oshima speaking. Thanks for the question. Regarding the currency so called sensitivity, it's not easy to explain just seeing a three month period. Maybe six months or 12 months, if we talk about, much easier to understand how much impact this currency creating.

And, not just on the U.S. Canadian currency is vis-à-vis the Japanese yen. Euro is also expanding and the strong sterling it was also effecting.

And, also, in other area if you're looking at, Brazilian market is expanding. Naturally, see the layout in the local currency also impacting to our operating profit line.

So, but the own just easy maths to be understood our financial statement, the impact to the -- by the currency swing. Still this variancing impacting U.S. dollar creating JPY20b. And that U.S. dollar included -- including Canadian currency as well.

And, also, the European side, euro creating about JPY3b on the year basis if one year moves both higher, lower.

And, also the, as I mentioned, in South America, Brazilian currency, the Real, is also expanding. It's also creating impact. Variancing towards the Real is about JPY3b on year basis.

So mention that euro currency and the Real is almost getting similar type of impact we have. That's the kind of status of our current -- our currency sensitivity.

Thank you.

Thank you. Okay. Shall we go to segment information section, starting from a business segment? Could you explain the -- or make a comment for those business segment information, Sugiama San?

Yes. I'd like to express from Motorcycle segment. Could you see the slide 20? Net sales of Motorcycles increased by 13.8% to JPY381.6b compared to the same period in 2006 due to fluctuating currency FX which offsetted the decreased sales units.

Operating income for Motorcycles increased by 15.4% to JPY30 -- JPY37b due to positive currency effects offsetting increased sales incentives in North America. Operating margin was 9.7%.

Slide 21. Net sales of Automobiles increased by 12.3% to JPY2,356.4b due to increase in its sales and positive currency effects.

Operating income of Automobile increased by 62.8% to JPY213b [sic. see presentation] due to increased growth from higher revenue, realized gain from changing inventories, continuing cost reduction report, and the positive currency effects, offsetting increased raw material costs, increased depreciation, SG&A and R&D expenses.

Operating margin was 9%, which increased by 2.8 points compared to the same period in 2006.

Slide 22. Net sales of Power Products increased by 4.9% to JPY105b due to increase in sales and positive currency effects.

Operating income of Power Products decreased by 6.5% to JPY6.9b due to the increased R&D expenses operating decreased SG&A expenses and positive currency effects.

Operating margin was 6.6%.

And slide 23. Net sales of Financial Services Business increased by 39.3% to JPY137.8b because of the increased revenue due to the growth of the Automobile business in North America, positive currency effects and start of operating lease transaction in the U.S.

Operating income of Financial Services Business increased by 29.7% to 9 -- JPY29.3b due to higher revenue of increased affiliated receivables and positive currency effects.

Operating margin was 21.3%. This is excluding the impact of starting operating lease transaction. The margin would be about 26%.

Thank you, Sugiama San. So, Doug San, do you have any concerns or questions about the Business segment information?

Yes, thank you. Just a very simple question. If we look at profits are up but margins are down, I'm just wondering if there's any impact from subprime lending filtering into Honda's Financial Services Business in North America?

Yes. My name is Okumichi. I would like to explain the subprime issues. Especially today I'd like to touch up on the impact of our Financial Company in the United States.

Our financial subsidiaries in United States offer long credit and other financial service to our customers. Potentially, our customers portfolio is consisting of the highest credit grade customer. So there is no significant impact relating to the so called subprime loss securities.

But the credit gross ratio currently shows a slight increase. That's occurred as long term and loan credit go forward due to the housing bubble part in the United States.

So (inaudible -- spoken in Japanese). Actually we could want provision on our financial receivables. But the other hand, currently strong demand for our share based [expensive cars] in used car market helped to reduce the provision for the risk internal loss. This could offset increased production of credit growth. Otherwise, there is no significant impact in our financial result.

Although to get lower credit gross ratios we have already started to apply the fixed credit criteria in the United customers.

That's all my explanation.

Thank you.

And that is in addition to that statement your original question mentioned that margin declined for the Financial Services. But, if you recall from the last -- third quarter of last year, we changed the accounting method of the leasing from financial lease to operating lease. So we then posted out by counting operating lease and, of course, including the operating lease that is going to be deducted by depreciation cost. So net profit is the same, but just a changing of the account method. So, excluding the operating lease from the [resenial], then the operating margin is generated at around 29%.

[I see] thank you.

Okay, thank you very much. So, okay, let's go to geographical segment information. Could you elaborate, Sugiama San?

Yes. Please look at slide 25. Revenue for export and domestic sales in Japan was JPY1,215.5b, up by 3.4% compared to the same period in 2006 due to increased unit sales for its part in Automobile business and positive currency effects.

Operating income in Japan increased by 6.3% to JPY73.3b due to increased profit from higher revenue, continuing cost reduction efforts, decreased SG&A expenses, and positive currency effects, which offset the increase for raw materials and increased depreciation and R&D expenses.

Operating margin was 6%.

Slide 26. In North America, revenue increased by 9.6% to JPY1,557.1b. This is increased unit sales in Automobile and positive currency effects.

Operating income increased by 21.2% to JPY116b due to the increased profit from higher revenue in Automobile and Financial Service Businesses, continuing cost reduction effects, and positive currency effects, which offset a change in model mix, the increased sales incentives in Automobile and Motorcycle businesses, and the increased raw material prices.

Operating margin was 7.5%.

Thank you, Sugiama San. How about European situation?

Yes, slide 27. In Europe, revenue increased by 25.8% to JPY390.8b due to the increase in sales in Automobile and positive currency effects.

Operating income increased by 84.7% to JPY16.7b due to the increased profit from higher revenue, continuing cost reduction effort and the good currency effects, offsetting the increased SG&A expenses.

Operating margin was 4.3%.

Thank you. It looks like the sales in European regions looks pretty strong. And I think the -- this could be contributed from the Eastern European countries, such as Russia's sales is pretty good I think. So could you have a --? Can you have an update for the European business situation, Okamoto San?

Yes, thank you. I'd like to start with the high trend of the European sales and looking at the second quarter.

Second quarter result was almost the same as the last quarter. That means the -- that we had a very much a positive sales coming from CR-V model and also the Civic C, which, both of them are produced in the U.K. And particularly CR-V sales were very good in second quarter, doubling over the same period last year. And, here, the sales are so strong that we expect this momentum will continue in the future so.

And if you look at the Russian market, the strong sales trend in Russia remained the same in this quarter as well. And, particularly this market for non-Russian car segment has recorded the almost 7% increase year on year basis in the first nine months from January to September.

Riding this market trend we outpaced the market, thanks to the very strong demand for CR-V and Civic Sedan model. And Honda sold out vehicles out in Russia during this Company's, Honda's second quarter, again double year on year, repeating the success in the first quarter. And we also expect this momentum to continue, based on the current backlog of orders.

And, similar to our sales situation in Russia, Honda's vehicles sales in the Central European market goes down to like the Czech Republic, Slovakia and Poland, recorded almost a 30% increase during the second quarter. And, once again, we expect this trend will continue as very much favorable sales reaction towards the CR-V and Civic C.

So, all for me, Taku San.

Thank you very much. So let's go to Asian regions and other regions. Sugiama San.

Yes. Could you see the slide 28. In Asia, revenue increased by 32.6% to JPY415.6b, which was increased unit sales in Automobile business and positive currency effects.

Operating income increased by 82.9% to JPY33.4b due to the increased profit from higher revenue and currency effects, which offset the increased SG&A expenses.

Operating margin was 8%.

Slide 29. Our increasing income of affiliates in Asia decreased by 4% to JPY22.2b due to the decreased profit of our affiliates in Indonesia.

Slide 30. In other regions, revenue increased by 36.4% to JPY267.9b due to the increased unit sales in all of the business segments and positive currency effects.

Operating income increased by 40.7% to JPY30.1b due to the increased growth from higher revenue and positive currency effects, offsetting increased SG&A expenses.

Operating margin was 7.3%.

Thank you.

Thank Sugiama San. So, Doug San, any questions or concern about the geographical segment information?

Yes, Gitamora San. If we could go back to slide 26, the North America region, I'm wondering if you could expand on the current trends in mix and incentives in North America for Honda?

Okay. As far as the incentives situation in the first and the second quarters, we've spent a lot of incentives to get -- made off the previous Accord. And we, of course, accrued reservation for the incentive in the first quarter and, actually, we cashed out for the incentives for the Accord. And, thanks to that, Accord sales in the past few months exceeding our expectations on a year on year basis, over 30% increase.

And our previous assumption was we had to wait maybe up until the end of November or December time to phase out all the previous Accord. But, thanks to the very strong demand for the incentivizing the Accord, we almost sold out Accord maybe by the end of this month. And some treatment] lines were of the fixed line, but the -- may be the end of November. But, actually, we successfully paid out the previous Accord.

So, in the second half, obviously incentive total growth -- amount will be decreased because we don't have to put any incentives on the new Accord. And the inventory control is well organized.

And, as far as the mix concerns, still we see some price gap between the crude oil and the actual gasoline price. And I'm just wondering you -- because crude oil price is so high, but still the gas price on the station still slightly lower, $3 per gallon in the U.S. But I assume that as long as the crude oil price stays that high, eventually, I think the gas pumps price will go up.

So, again, the general trend is towards more fuel efficient cars. And even the Light Truck segment, fill, high fill end segment will be highly captured I think.

Thank you, Ike San.

Okay. So far we discussed about the operating profits line. And I would like to move towards the non-operating income and expenses situation. Could you explain that, Okumichi San?

Yes. Please look at slide 15 and again year on year changes. Fair value of derivative instruments by plus JPY19.2b, and others by minus JPY6.2b. Totally, plus JPY13b. And for derivative details, please see the slide 17. Okay.

Okay. Thank you, Okumichi san. So that's basically the findings for the second quarter's results. And we would like to go into the new guidance figures. So please turn to slide number 38.

And the revenue for entire fiscal year, new guidance is JPY12,300b which is 10.9% increase over the last fiscal year. And the operating profit, which is JPY880b, which is unchanged from comparing to July 25 announcement and a 3.3% increase over the fiscal -- past fiscal years. And income before income tax is going to be JPY870b which is 9.7% increase. And the net profit for our new guidance is JPY640b, which is 8.0% increase.

And the estimate for EPS is JPY352.85, which is 8.7% increase. And the exchange rate assumption for U.S. dollar will be JPY116 and EUR1 will be JPY155. And the US -- for U.S. dollars JPY1 weaker, and for euro JPY4 weaker, comparing to last fiscal year. So starting for unit sales for new guidance, could you start to explain those information Okumichi san?

Let's see the slide 37 for unit sales forecast and changes. For Motorcycles, 9,580,000 units, decreasing this year on year base 789,000 units. And Automobiles, 3,935,000 units increasing 283,000 units, plus -- compared from the previous plan, decreasing 35,000 units in Japan. And Power Products, 6,335,000 units, decreasing 86,000 units.

Okay. Thank you very much. So how about the changing factors of income before income taxes? Could you explain that?

Okay. On year on year basis, please look at slide 39. Revenues and model mix is expected to increase to JPY174.3b. Okay. And SG&A will be minus JPY106b in year on year basis. Also sales expenses will increase due to increased unit sales. Unchanged -- changes from the previous run, this is July 25 (inaudible), yen-appreciation impact is minus JPY21b. However, it will be offset by increasing revenue and increasing cost reduction efforts. Thank you.

Okay. Thank you very much, Okumichi san. So, Doug san, do you have any question regarding the new guidance?

Yes. From here we can compute the implied second half outlook for this year versus last. I wonder if you could just explain more about your second half outlook? Thank you.

Okay. This is Ike again. Considering the first half of strong results, our guidance for the second quarter still looks very severe numbers, because we didn't change any assumption for the exchange rate. And, for example, the U.S. the second-half average exchange rate is 1.13 and comparing to the actual prevailing rates, average prevailing rates of 119. So that means in terms of yen and U.S. dollar is JPY6 stronger compared to the first half. And more noticeable, we didn't change the -- our new assumptions for the second quarter -- second-half average of EUR140, but actually the prevailing rate for the first half was JPY162. So there is a 14 difference between -- in euro. And this assumption is -- maybe, the dollar assumption is almost very close to the current prevailing rate. But euro and other currency assumption is still -- there is a big gap between the actual prevailing rate and this assumption rate. So second half profit is reflecting this strong assumption of the trend for the stronger Japanese yen appreciation.

And in terms of the volume, and -- for example, of course, we include this new Accord. But if you look at the North American operations' first and second half, the Group's total unit volume is not necessarily increasing. So the second quarter's outlook looks unfavorable, but just reflecting a very strong unit assumptions.

Thank you.

So the -- lastly, the -- regarding the capital expenditure and the depreciation and R&D expenses. If you look at the slide number 41, basically, there was no change compared to the July 25 announcement. So that's just a reminder.

And lastly, the -- for the cash dividend, there was a certain revision for that cash dividend per share. So could you make a comment on this cash dividend Ike San?

Yes. Actually, in the first quarter -- at our first quarter's announcement we revised our outlook for the year from JPY770b operating income to JPY880b. And, at that time, we didn't change any outlook of the -- our dividend. Our dividend per share through the year is the ATM per share. And after the second quarter's results, we revised our net income from the very original first guideline of JPY575b up to JPY400 -- JPY640b this time, so reflecting the revised net income. We increased our share -- dividend per share JPY2 in addition to the original JPY20 per share per quarter.

So we are planning to pay the same amount of dividend per share, JPY22, at the third quarter and the year end dividend. So total dividend will be, from original plan of JPY86. So that is the actual dividend from JPY67 per share for the year to JPY86. That is JPY19 up for the year.

Thank you very much, Ike San. So that's new message for investors regarding dividends. And we -- let's go to the Q&A session. So, operator, could you take questions?

Thank you. (OPERATOR INSTRUCTIONS). Your first question is coming from Jairam Nathan of Banc of America Securities.

Hi. Thank you. I was just looking at your 2008 ROCE. You have JPY174b in revenue model mix improvements and you have, year to date the first half you have done JPY133b already. And if I look to the second half, you said that you would be spending less on incentives on the Accord, and you'd probably see some more volume benefits from the Accord. I'm wondering can you reconcile those two? Why would the second half look much lower than the first half?

Okay. Well, as I explained that the incentive spending will be much lower second half of the year. However, the SG&A actually, in the first half, the spending of the SG&A was slightly less than our original budget. So combining SG&A and R&D expenses, actually, roughly speaking, JPY50b incrementation boosted up our operating margin -- operating profit for the first half.

But, actually, through the year, this R&D and SG&A JPY50b will be incurred in the second half in addition to the original JPY100b. So we are budgeted now total JPY150b SG&A. So that is the increased SG&A, considering the net SG&A and budget is the largest contributor of the imbalance of the first half and the second half.

But if I go to slide 39, you have the SG&A increase of JPY106b. So the JPY50b, is that in revenue model mix?

No. I am talking about the first half and the second half imbalance. And you mentioned slide 30 -- you said 39?

Yes.

Yes. So this is -- 39 is our new guideline compared to the last year's actual. The number I mentioned was the first half actual and the second half budget imbalance. So SG&A, as I said before, JPY100b incrementation reflecting the growth of the business volume.

Okay. Okay. And can you explain the inventory, the unrealized profit on inventory and which region it has hit the most?

North America. If you recall the second quarter of last year, we launched a new CR-V at the very last week of September. And the first supply is supplied from Japanese built CR-V. So we shipped 27,000 CR-Vs to the U.S. in preparation to distribute to our dealers. So of course we have to eliminate the profit included in the shipment to the North American Honda.

Yes.

That elimination was large. And this year's elimination of -- in our profit is, of course, the total inventory is low. And so that's why all those blatant profit did not materialize.

Okay. Thank you. That's all for now.

Thank you. (OPERATOR INSTRUCTIONS). Your next question is coming from Steve Usher of Japan Investment.

Good morning, Mr. (inaudible) and everyone. And congratulations on a very good second quarter.

Could you provide a bit more detail on two particular markets, the Brazilian and the Russian markets? Could you give us the revenues and the operating profits from those two markets? And if possible the sales volume for Automobiles and Motorcycles?

Secondly, in terms of equity income, can you give us a breakout of just the Chinese contribution and the year on year change there within equity method income?

Okay, Steve. Are you okay? We know that in San Diego you have a very big fire.

Well, thank you very much for asking. We just returned to our home yesterday. We had been evacuated and we got back late yesterday afternoon. So this -- last night was the first night we were able to sleep here. The house made it. The neighborhood made it. Thank you very much.

Okay. Sorry. Okay. Regarding the Brazilian contribution, previously, of course, the Motorcycle operation was the largest contributor to the Brazilian operations. But now that -- so they can (big) models especially we included the mixed fuel vehicles which the customer can mix alcohol and gasoline at any rate. That captured a very high acceptance in the market. So especially for the second quarter revenue and Automobile's contribution volume is very big. And maybe this second quarter specific portion, maybe the volume contribution maybe three times as big as the Motorcycle contribution this year.

In terms of Russian unit sales incrementation, maybe Okamoto San can elaborate there.

(inaudible - microphone inaccessible) figures over 10,000. And the main variant was double the figure (inaudible -- technical difficulties) second quarter. And (inaudible - microphone inaccessible) same. So we recorded over 20,000 release the -- for the first half. And there was also a 100% increase over the last same [period].

And as far as the equity income. Of course, we cannot specify the numbers through the -- our joint ventures Company. But I can say that Indonesian joint ventures are -- equity income is decreased because they are facing a very severe competition in the marketplace.

But in China, our equity income has continued to increase, especially -- previously the largest contributor was, of course, [Manjo] Honda. And now that the -- after the instruction of new (inaudible) especially importing the CR-V don't have Honda, their volume is increasing so drastically. Their profit is increasing. So equity in income, in China, is continuing to increase.

Okay. Great. Thank you. Could you comment on the sales revenues and profits for Brazil and Russia?

I don't have any breakdowns by each country. But if you look at the -- our segment information by the region, and the other areas which -- largest contributor is Brazil. So -- but I'm afraid to say I don't have any breakdown for the -- Brazil itself only.

Okay. Okay. Great. Thank you very much.

Thank you. (OPERATOR INSTRUCTIONS). There appears to be no further questions. At this time I would like to turn the call back over to your host for any closing remarks.

Okay. Thank you for joining this conference call, again. And if you have additional questions you can reach us at our New York office. The number is 21 212 355 9191. So I will be in office all day, so you can reach me anytime tomorrow or anytime. So thank you very much for joining this conference call, again. So thank you for our speakers Ike San and Taku San.

Thank you..

Thank you.

Thank you very much. Have a good day, everybody.

Thank you. This concludes today's Honda Motors' second quarter earnings conference call. You may now disconnect.