Honda Announces Its Revised Forecasts for the Fiscal
Year
TOKYO, March 27 Honda Motor Co., Ltd. ("Honda")
today announced its revised forecasts for the fiscal year ending
March 31, 2001. This announcement refers to Honda's forecasts that were
released on November 8, 2000 together with its financial results for the six
months ended September 30, 2000.
1. Forecasts for Consolidated Financial Results
1) Revised Forecasts (April 1, 2000 through March 31, 2001)
Net sales Income Net
and other before income
operating income
revenue taxes
(In millions of yen)
Forecasts before revision (A) Yen 6,220,000 360,000 220,000
Forecasts after revision (B) 6,350,000 375,000 230,000
Increase (decrease) (B-A) 130,000 15,000 10,000
Rate of increase (decrease) 2.1% 4.2% 4.5%
Results for the year ended March 31, 2000 6,098,840 416,063 262,415
2) Reasons for Revision
As shown in the above table, Honda has improved its forecasts for all
the above three items. Improvement in Honda's projected net sales and other
operating revenue, despite an expected decrease in Europe, is attributable to
increasing sales of automobiles in Japan and motorcycles, together with the
positive impact of currency translation effects resulting from the
depreciation of the yen exceeding Honda's expectation as of November 2000.
Improvement in Honda's projected income before income taxes and net income,
despite expected decreases in Europe, is attributable to the depreciation of
the yen, increases in unit sales of automobiles in Japan as well as changes in
the model mix of automobile sales in North America.
2. Forecasts for Unconsolidated Financial Results
1) Revised Forecasts (April 1, 2000 through March 31, 2001)
Net sales Ordinary Net
profit income
(In millions of yen)
Forecasts before revision (A) Yen 2,950,000 120,000 88,000
Forecasts after revision (B) 3,030,000 130,000 11,000
Increase (decrease) (B-A) 80,000 10,000 (77,000)
Rate of increase (decrease) 2.7% 8.3% (87.5%)
Results for the year ended March 31, 2000 2,919,840 201,440 135,322
2) Reasons for Revision
As shown in the above table, Honda has improved its forecasts for net
sales and ordinary profit. Improvement in Honda's projected net sales,
despite expected decreases in exports of automobiles and power products, is
attributable mainly to favorably increasing sales of motorcycles and
automobiles in Japan as well as favorable currency translation effects.
Improvement in Honda's projected ordinary profit is attributable mainly to
increases in net sales and charges in the model mix. As to net income, Honda
has revised its initial projection and anticipates a decrease in the amount of
11,000 million Yen, an 87.5% decrease from its projection in November 2000.
This is attributable to, among other things, expected impairment from
revaluation of shares owned by Honda in Honda Motor Europe Ltd. As to the
year-end cash dividend, however, Honda has maintained its initial projection
that was released in November 2000. The year-end dividend will be 12.00 Yen
per share of common stock.
3. Write-off Treatment of Shares in Honda Motor Europe Ltd.
1) Honda's board of directors resolved, at its meeting held today, that
shares of Honda Motor Europe Ltd. ("HME") owned by Honda be revalued and the
impairment resulting therefrom be recognized for the fiscal year ending
March 31, 2001. Since the value of HME shares owned by Honda substantially
dropped as a result of HME's poor business results, 81.5 billion Yen will be
written off pursuant to "Opinion as to Establishment of Accounting Rules
relating to Financial Products" (Corporate Accounting Committee's release
dated January 22, 1999), which has been effective from April 2000. In this
connection, a special loss will be recognized and "loss from revaluation of
affiliate's shares" will be stated in Honda's unconsolidated financial
statements for the year ending March 31, 2001. Honda expects, however, this
write-off treatment will have no impact on its consolidated financial results,
as HME is a consolidated subsidiary of Honda and HME's financial status and
results have been consolidated.
2) Loss from revaluation of HME shares recognized for the year ending
March 31, 2001 (Its ratio to Honda's net assets and net income for
the year ended March 31, 2000)
Loss from revaluation of HME shares
recognized for the year ending March 31, 2001 (A) 81,555 million Yen
Net income for the year ended March 31, 2000 (B) 135,322 million Yen
(A)/(B) x 100 60.3
Information of HME
(1) Name: Honda Motor Europe Limited
(2) Address: Berkshire, United Kingdom
(3) Capital: 428,000 thousand pounds(90.96% owned by Honda)
(4) Business: Coordination and management of businesses conducted by
Honda's subsidiaries in Europe; and import and sale of
Honda's products
4. Honda's European Business
In Europe, Honda has been operating in a difficult environment and,
primarily owing to the appreciation of the yen against the European currencies
as well as the weakness of the euro against the sterling pound, has recorded
losses in the region since the fiscal year ended March 31, 2000.
In this environment, Honda has sought to improve its European business by
restructuring its European sales and distribution organizations into three
regional operations covering wider areas in order to facilitate more
market-oriented marketing strategies. Nonetheless, Honda expects conditions
in Europe to remain difficult for the foreseeable future. For example, unit
sales of automobiles in the region in the current fiscal year are projected to
decrease by 24% from the previous fiscal year to 190,000 units, and Honda
expects its profitability to weaken in the region partly due to pricing
pressure in the United Kingdom. Moreover, as a consequence of measures
designed to lower inventory, output from Honda's U.K. automobile manufacturing
subsidiary, Honda UK Manufacturing Limited ("HUM"), is expected to reach
approximately 78,000 units, a 26% decrease from the previous fiscal year.
To bolster its European business in the coming years, Honda will reinforce
its current marketing strategies and endeavor to improve overall unit sales by
increasing sales of the new Civic series and introducing the Stream minivan, a
new small car and the brand-new CR-V. On the manufacturing side, Honda will
take steps to make HUM fully operational. These steps include exporting the
brand-new Civic 3-door model to Japan and the CR-V to North America. Honda
also intends to strengthen its European manufacturing capabilities with its
ongoing cost reduction efforts.
