Honda Motor Co., Ltd. Reports Consolidated Financial Results Ending Sept 30, 2008


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TOKYO, JPN. October 28, 2008: Honda Motor Co., Ltd. today announced its consolidated financial results for the fiscal second quarter and the fiscal first half ended September 30, 2008.

Second Quarter Results

Honda's consolidated net income for the fiscal second quarter ended September 30, 2008 totaled JPY 123.3 billion (USD 1,191 million), a decrease of 40.9% from the same period in 2007. Basic net income per common share for the quarter amounted to JPY 67.96 (USD 0.66), a decrease of JPY 46.98 from JPY 114.94 for the corresponding period last year. One Honda American Depository Share represents one common share.

Consolidated net sales and other operating revenue (herein referred to as "revenue") for the quarter amounted to JPY 2,826.8 billion (USD 27,294 million), a decrease of 4.9% from the same period in 2007, resulting primarily from currency translation effects. Honda estimates that if calculated at the same exchange rate as the corresponding period in 2007, revenue for the quarter would have increased by approximately 1.7%.

Consolidated operating income for the quarter totaled JPY 148.8 billion (USD 1,437 million), a decrease of 48.0%, due primarily to increased SG&A expenses, the negative impact of currency effects caused by the appreciation of the Japanese yen, the negative impact of decreased revenue, model mix, etc. and increased raw material costs, despite continuing cost reduction efforts.

Consolidated income before income taxes, minority interest and equity in income of affiliates for the quarter totaled JPY 149.4 billion (USD 1,443 million), a decrease of 44.6% from the same period in 2007.

Equity in income of affiliates amounted to JPY 27.2 billion (USD 263 million) for the quarter, an increase of 4.0% from the corresponding period last year.

Business Segment

With respect to Honda's sales for the fiscal second quarter by business segment, motorcycle unit sales totaled 2,893 thousand units, an increase of 24.0% from the same period last year. Unit sales in Japan totaled 79 thousand units, a decrease of 26.2% compared to the same period last year. Overseas unit sales was 2,814 thousand units, an increase of 26.4% from the same period in 2007, due mainly to increased unit sales in Asia and Other regions including Brazil and an increase in sales of motorcycle knocked-down parts for local production at Asian affiliates accounted for under the equity method in Indonesia and India. Revenue increased 5.1%, to JPY 401.0 billion (USD 3,873 million) from the same period last year, due mainly to increased sales in Asia and other regions including Brazil, offsetting negative currency translation effects. Operating income was JPY 46.3 billion (USD 448 million), an increase of 25.4% from the same period last year, due mainly to the positive impact of increased revenue, model mix, etc. and continuing cost reduction efforts, more than offsetting increased raw material costs.

Honda's automobile unit sales totaled 935 thousand units, approximately the level of the same period last year. In Japan, unit sales amounted to 152 thousand units, an increase of 6.3% from the same period last year. Overseas unit sales decreased 1.4% to 783 thousand units from the corresponding period last year, due mainly to weak demand for light trucks in North America and decreased unit sales in Europe, more than offsetting an increase of unit sales in Asia and other regions including Brazil and increased sales of automobile knocked-down parts for local production at Chinese affiliates accounted for under the equity method. Revenue decreased 7.9% to JPY 2,170.6 billion (USD 20,958 million) from the same period in 2007, due mainly to the negative impact of currency translation effects and decreased overseas unit sales. Operating income decreased 62.9% to JPY 79.0 billion (USD 763 million) from the same period last year, due primarily to the negative impact of decreased revenue, model mix etc., the negative currency effects caused by the appreciation of the Japanese yen, increased SG&A expenses and increased raw material costs, more than offsetting continuing cost reduction efforts.

Revenue from customers in the financial services business increased 18.5% to JPY 158.5 billion (USD 1,531 million) from the same period in 2007, due mainly to an increase in operating lease revenues. Operating income decreased 17.1% to JPY 24.3 billion (USD 235 million) from the same period in 2007, due primarily to the increased provision related to credit losses and allowance for losses on lease residual values, and the negative currency effects caused by the appreciation of the Japanese yen, despite increased revenue.

Honda's power product unit sales totaled 1,202 thousand units, a decrease of 4.5% from the same period in 2007. In Japan, unit sales totaled 146 thousand units, an increase of 3.5% from the same period last year. Overseas unit sales totaled 1,056 thousand units, a decrease of 5.5% from the corresponding period last year, due primarily to a decline of unit sales of general-purpose engines for OEM* production in North America and Europe. Revenue in the power product and other businesses decreased by 2.8% to JPY 96.6 billion (USD 933 million) from the same period last year, due mainly to decreased unit sales of power products. Operating income decreased JPY 7.8 billion from the same period in 2007, to record operating loss of JPY 924 million (USD 9 million). This was primarily due to increased R&D expenses of other businesses and the negative impact of decreased revenue, model mix, etc.

Geographical Information

With respect to Honda's sales for the fiscal second quarter by geographic area, in Japan, revenue for domestic and exports sales amounted to JPY 1,193.5 billion (USD 11,524 million), down 1.8% compared to the same period last year, due primarily to decreased export sales in automobile business. Operating income totaled JPY 40.9 billion (USD 395 million), down 44.2% from the same period last year due primarily to the negative impact of the currency effects caused by the appreciation of the Japanese yen, the negative impact of decreased revenue, model mix, etc., increased raw material costs and increased depreciation expenses, more than offsetting continuing cost reduction efforts and decreased SG&A expenses.

In North America, revenue decreased by 12.0% to JPY 1,370.0 billion (USD 13,228 million) from the same period in 2007 due mainly to the negative impact of the currency translation effects, decreased revenue in automobile business and decreased unit sales in all of the business segments. Operating income decreased by 80.6% to JPY 22.5 billion (USD 217 million) from the same period last year due primarily to increased SG&A expenses, the negative impact of currency effects caused by appreciation of the Japanese yen, the negative impact of decreased revenue, model mix, etc., increased raw material costs and the increased provision related to credit losses and allowance for losses on lease residual values, more than offsetting continuing cost reduction efforts.

In Europe, revenue decreased by 10.3% to JPY 350.7 billion (USD 3,386 million), from the same period in 2007 due primarily to the negative impact of currency translation effects and decreased revenue in automobile business. Operating income decreased by 50.5% to JPY 8.3 billion (USD 80 million) from the same period last year due primarily to the negative impact of decreased revenue, model mix, etc., increased SG&A expenses and increased raw material costs, despite continuing cost reduction efforts.

In Asia, revenue increased by 8.7% to JPY 451.8 billion (USD 4,363 million) from the same period last year due to increased revenue in all business segments, offsetting the negative impact of the currency translation effects. Operating income increased by 9.6% to JPY 36.6 billion (USD 354 million) from the corresponding period last year due mainly to the positive impact of increased revenue, model mix, etc., more than offsetting the negative impact of currency effects caused by appreciation of the Japanese yen and increased SG&A expenses.

In Asia, in addition to subsidiaries, many affiliates accounted for under the equity method manufacture and sell Honda-brand products. Operating income does not include income from these affiliates. Income from these affiliates is recorded as equity in income of affiliates and reflected in net income. Accounting terms of some of the affiliates differ from the Company's.

In other regions such as Latin America, Middle East, Africa and Oceania, revenue increased by 30.5% to JPY 349.5 billion (USD 3,375 million) compared to the same period last year, due mainly to increased revenue in all business segments. Operating income increased by 61.7% to JPY 48.7 billion (USD 471 million) from the corresponding period in 2007 due mainly to the positive impact of increased revenue, model mix, etc. and the positive currency effects caused by the depreciation of the Japanese yen, more than offsetting increased SG&A expenses.

United States dollar amounts have been translated from yen solely for the convenience of the reader at the rate of JPY 103.57 = U.S.$1, the mean of the telegraphic transfer selling exchange rate and the telegraphic transfer buying exchange rate prevailing on the Tokyo foreign exchange market on September 30, 2008.

First Half-Year Results

Honda's consolidated net income for the fiscal first half year ended September 30, 2008 totaled JPY 302.9 billion (USD 2,925 million), a decrease of 19.1% from the same period in 2007. Basic net income per Common share for the period amounted to JPY 166.94 (USD 1.61), a decrease of JPY 39.32 from JPY 206.26 for the same period in 2007.

Consolidated revenue for the period amounted to JPY 5,694.0 billion (USD 54,978 million), a decrease of 3.5% from the same period in 2007, primarily due to currency translation effects. Honda estimates that if calculated at the same exchange rate as the same period in 2007, revenue for the quarter would have increased by approximately 4.4%.

Consolidated operating income for the period totaled JPY 370.1 billion (USD 3,574 million), a decrease of 27.1% compared to the same period in 2007. This decrease in operating income was primarily due to the negative currency effects caused by the appreciation of the Japanese yen, increased SG&A expenses and increased raw material costs, more than offsetting the positive impact of higher transaction price and continuing cost reduction efforts.

Consolidated income before income taxes, minority interest and equity in income of affiliates for the period totaled JPY 384.5 billion (USD 3,713 million), a decrease of 21.2% from the same period in 2007.

Equity in income of affiliates amounted to JPY 65.4 billion (USD 632 million) for the period, an increase of 3.5% from the same period in 2007. Equity in income of affiliates set a record high for the fiscal first half.

Business Segment

With respect to Honda's sales for the fiscal first half by business segment, unit sales of motorcycles totaled 5,608 thousand units, an increase of 22.3% from the same period in 2007. Unit sales in Japan totaled 137 thousand units, a decrease of 28.3%. Overseas unit sales was 5,471 thousand units, an increase of 24.5%, due mainly to the increased units sales of motorcycle knocked-down parts for local production at Honda's affiliates accounted for under the equity method in Asia. Revenue increased 5.9%, to JPY 794.1 billion (USD 7,668 million) from the same period in 2007, due mainly to increased revenue in Asia and Other Regions including Brazil, despite the negative currency translation effects. Operating income increased by 13.8 % to JPY 77.5 billion (USD 749 million) from the same period in 2007, due mainly to the positive impact of increased revenue, model mix, etc., which more than offset increased SG&A expenses and the negative currency effects caused by the appreciation of the Japanese yen.

Honda's unit sales of automobiles was 1,897 thousand units, increased by 0.7% from the same period in 2007. In Japan, unit sales totaled 280 thousand units, approximately the same level of the same period in 2007. Overseas unit sales increased 0.8% to 1,617 thousand units, due mainly to the increased unit sales in Asia and other regions including Brazil. Revenue decreased 6.1% to JPY 4,398.6 billion (USD 42,470 million) from the same period in 2007, due to the negative impact of the currency translation effects, more than offsetting increased overseas unit sales. Operating income decreased 33.5% to JPY 240.2 billion (USD 2,320 million) from the same period in 2007, primarily due to the negative currency effects caused by the appreciation of the Japanese yen, increased SG&A expenses and increased raw material costs, which more than offset the positive impact of model mix, etc., continuing cost reduction efforts and decreased R&D expenses.

Revenue in financial services business increased 17.2% to JPY 304.3 billion (USD 2,938 million) from the same period in 2007, due mainly to the increased operating lease revenues, despite negative currency translation effects. Operating income decreased 16.4% to JPY 53.0 billion (USD 513 million) from the same period in 2007, due mainly to the increased provision related to credit losses and allowance for losses on lease residual values, which more than offset the increased revenue.

Honda's unit sales of power products was 2,541 thousand units, down by 8.8 % from the same period in 2007. In Japan, unit sales totaled 305 thousand units, an increase of 10.5%. Overseas unit sales decreased 11.0%, to 2,236 thousand units, due mainly to the declined unit sales in North America and Europe. Revenue in power product and other businesses decreased by 5.8% to JPY 196.9 billion (USD 1,902 million) from the same period in 2007, due mainly to decreased unit sales in power product business. Operating income decreased JPY 15.6 billion from the same period in 2007, to record operating loss of JPY 715 million (USD 7 million), due mainly to the negative impact of decreased revenue, model mix, etc. and increased R&D expenses of other businesses.

Geographical Information

With respect to Honda's sales for the fiscal first half by geographical segment, in Japan, revenue for domestic and exports sales was JPY 2,343.1 billion (USD 22,624 million), down by 2.0% compared to the same period in 2007, due primarily to decreased revenue in motorcycle and automobile businesses in Japan. Operating income was JPY 78.8 billion (USD 761 million), down by 41.2% from the same period in 2007, due primarily to the negative currency effects caused by the appreciation of the Japanese yen, decreased revenue and increased raw material costs, which more than offset continuing cost reduction efforts, decreased SG&A expenses and decreased R&D expenses.

In North America, revenue decreased by 8.8% to JPY 2,863.2 billion (USD 27,645 million) from the same period in 2007, due mainly to the negative impact of the currency translation effects and decreased revenue in automobile business. Operating income decreased by 45.0% to JPY 117.1 billion (USD 1,131 million) from the same period in 2007, mainly due to the negative currency effects, increased SG&A expenses and increased raw material costs, more than offsetting the positive impact of model mix, etc. and continuing cost reduction efforts.

In Europe, revenue decreased by 9.6% to JPY 715.2 billion (USD 6,906 million) compared to the same period in 2007, due primarily to the negative impact of the currency translation effects. Operating income decreased by 27.6% to JPY 19.5 billion (USD 189 million) from the same period in 2007, due mainly to increased SG&A expenses and the negative currency effects caused by the appreciation of the Japanese yen, more than offsetting continuing cost reduction efforts.

In Asia, revenue increased by 9.8% to JPY 888.0 billion (USD 8,575 million) from the same period in 2007, due primarily to the increased revenue in all of the business segments, which offset the negative impact of the currency translation effects. Operating income increased by 20.7% to JPY 84.9 billion (USD 820 million) from the same period in 2007, due mainly to the positive impact of increased revenue, model mix and continuing cost reduction efforts, more than offsetting the negative currency effects caused by the appreciation of the Japanese yen and increased SG&A expenses.

In other regions, revenue increased by 30.2% to JPY 643.3 billion (USD 6,212 million) compared to the same period in 2007, due mainly to the increased revenue in all of the business segments. Operating income increased by 63.9% to JPY 85.1 billion (USD 822 million) from the same period in 2007, due mainly to the positive impact of increased revenue, model mix and the positive currency effects caused by the appreciation of the Japanese yen, despite increased SG&A expenses.

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