Honda Motor CO., Ltd. Reports Consolidated Financial Results for the Fiscal Second Quarter and the First Half Ended September 30, 2004
TOKYO, Oct. 27, 2004 -- Honda Motor Co., Ltd. today announced its consolidated financial results for the fiscal second quarter and the first half ended September 30, 2004.
Second Quarter Results
Honda's consolidated net income for the fiscal second quarter ended September 30, 2004 totaled JPY127.1 billion (USD 1,145 million), a decrease of 7.5% from the corresponding period in 2003. Basic net income per Common Share for the quarter amounted to JPY 135.70 (USD 1.22). Two of Honda's American Depositary Shares represent one Common Share.
Unit sales in all of Honda's business categories, namely motorcycles, automobiles and power products, increased during the fiscal second quarter and consolidated net sales and other operating revenue (herein referred to as "revenue") for the quarter amounted to JPY 2,093.5 billion (USD 18,853 million), an increase of 3.8% over the corresponding period in 2003.
Consolidated operating income for the fiscal second quarter totaled JPY 172.9 billion (USD 1,557 million), an increase of 9.2% compared to the corresponding period in 2003. This increase in operating income was primarily due to an increase in revenue contributed by higher unit sales of automobiles, motorcycles and power products, and ongoing cost reduction effects, which offset the negative effects of the appreciation of the yen against the U.S. dollar and an increase in selling, general and administrative (SG&A) expenses.
Consolidated income before income taxes for the quarter totaled JPY 165.5 billion (USD 1,491 million), a decrease of 10.0% from the corresponding period in 2003.
With respect to Honda's sales in the fiscal second quarter by business category, motorcycle unit sales increased by 21.8% to 2,701 thousand units. Of them, unit sales in Japan decreased 8.3% to 110 thousand units, and overseas unit sales increased 23.5% to 2,591 thousand units. Continued strong sales in Asia, such as Indonesia and India, and other regions, such as Brazil, and improved profit of ATV mainly contributed to these increase in unit sales. Revenue from sales to unaffiliated customers increased 9.7%, to JPY 256.0 billion (USD 2,306 million) due to increases in unit sales, offsetting negative currency translation effects. Operating income increased by JPY18.0 billion (939.4%) to JPY 20.0 billion (USD 180 million).
Honda's unit sales of automobiles increased by 8.0% to 794 thousand units. In Japan, unit sales of automobiles increased 8.0% to 190 thousand units, contributed by the new models, the Elysion, the Edix and the Odyssey. Overseas unit sales increased 8.1% to 604 thousand units. Increased unit sales of parts for local production in China, and favorable sales in Europe were the major contributing factors for this increases in unit sales. Revenue from sales to unaffiliated customers increased 2.9%, to JPY 1,693.8 billion (USD 15,253 million) during the quarter, due to increased unit sales, offsetting negative currency translation effects. Operating income decreased 3.0% to JPY 120.1 billion (USD 1,082 million) due mainly to negative currency effects caused by the appreciation of the yen against the U.S. dollar, which offset positive impacts of higher profit from increased revenue, improved model mix in Japan and ongoing cost reduction effects.
Revenue from sales to unaffiliated customers in financial services increased 3.1% to JPY64.8 billion (USD 584 million). Operating income decreased 14.5% to JPY 25.5 billion (USD 230 million).
Unit sales of power products totaled 1,085 thousand units, an increase of 10.9% compared to the corresponding period in 2003. Of them, unit sales in Japan totaled 102 thousand units, decreased by 24.4%, and overseas unit sales increased 16.6% to 983 thousand units, due primarily to increased unit sales of multipurpose engines for OEM and generators in North America and Europe. Revenue from sales to unaffiliated customers increased by 5.8% to JPY 78.8 billion (USD 710 million), due primarily to increased unit sales of power products, offsetting negative currency translation effects. Operating income increased 160.7% to JPY 7.2 billion (USD 66 million)
With respect to Honda's sales for the second quarter by geographic segment, in Japan, revenue was JPY 1,020.8 billion (USD 9,192 million), up by 8.2% compared to the corresponding period in 2003, due primarily to increased unit sales in automobile business. Operating income in Japan was JPY 53.8 billion (USD 485 million), up by 47.1%, with higher profit from increased unit sales, improvements of model mix in automobiles business and cost reduction effects, offsetting negative impacts of appreciation of the yen against the U.S. dollar.
In North America, revenue decreased by 5.9% from the previous year to JPY 1,098.5 billion (USD 9,893 million), due to the negative impact of the appreciation of the yen against the U.S. dollar, although unit sales in motorcycles and power products increased. Operating income in North America increased by 6.4% to JPY 85.1 billion (USD 767 million) from the corresponding period of the previous year, due to an improved profit of ATV, ongoing cost reduction effects and revised prices for 2004 year models, which offset the negative impact of the appreciation of the yen.
In Europe, revenue for the quarter increased by 8.9% to JPY 240.0 billion (USD 2,162 million) compared to the corresponding period of the previous year, due primarily to increased unit sales in motorcycles, automobiles and power products. Operating income in Europe decreased by 21.9% to JPY 9.0 billion (USD 82 million), due mainly to increased SG&A expenses.
In Asia, revenue increased by 18.4% to JPY 212.5 billion (USD 1,914 million) from the previous year, due mainly to continued strong sales in motorcycle and automobile businesses. Operating income also increased by 24.4% to JPY 17.5 billion (USD 158 million) from the corresponding period of the previous year.
Revenue from other regions for the quarter increased by 29.6% to JPY 116.6 billion (USD 1,050 million) compared to the corresponding period of the previous year, due to increased unit sales in automobile business in Latin America and Oceania, and motorcycle business in Latin America. Operating income increased by 88.3% to JPY 10.5 billion (USD 95 million) from the corresponding of the previous year.
First Half-Year Results
Honda's consolidated net income for the first six months ended September 30, 2004 totaled JPY 241.3 billion (USD 2,174 million), an increase of 0.9% from the corresponding period of the previous year. Basic income per Common Share for the fiscal first half amounted to JPY 257.35 (USD 2.32), compared to JPY 249.34 for the corresponding period a year ago.
Consolidated net sales and other operating revenue for the six month period amounted to JPY 4,166.7 billion (USD 37,521 million), an increase of 3.5% from the corresponding period last year.
Consolidated operating income for the fiscal first half totaled JPY 332.9 billion (USD 2,998 million), an increase of 4.7% compared to the corresponding period last year. This increase in operating income was primarily due to an increase in revenue contributed by higher unit sales of automobiles, motorcycles and power products, and ongoing cost reduction effects, which offset the negative effects of the appreciation of the yen against the U.S. dollar and increase of selling, general and administrative (SG&A) expenses.
Consolidated income before income taxes for the fiscal first half totaled JPY 339.6 billion (USD 3,059 million), an increase of 2.3% compared to the corresponding period of the previous year.
With respect to Honda's sales for the fiscal first half by business category, motorcycle unit sales increased 25.2% to 5,283 thousand units. Of them, unit sales in Japan decreased 3.3% to 207 thousand units, while overseas unit sales increased 26.7% to 5,076 thousand units in all regions, mainly in Asia. Revenue from sales to unaffiliated customers increased 11.6% to JPY 530.1 billion (USD 4,774 million), due primarily to increased unit sales, offsetting negative currency translation effects. Operating income increased 383.1% to JPY 37.2 billion (USD 335 million). Higher profit from increased revenue and improved model mix were the major contributing factors for this increase in operating income.
Unit sales related to automobiles for the fiscal first half increased by 8.5% to 1,566 thousand units. In Japan, unit sales of automobiles increased 4.6% to 344 thousand units, and overseas unit sales increased 9.7% to 1,222 thousand units. Revenue from sales to unaffiliated customers increased 2.5% to JPY 3,349.0 billion (USD 30,158 million), due to increased unit sales, which offset negative currency translation effects. Operating income decreased 4.2% to JPY 235.7 billion (USD 2,123 million), due mainly to negative currency effects of appreciation of the yen against the US. dollar, which offset positive impacts of higher profit from increased revenue and cost reduction effects.
Revenue from sales to unaffiliated customers in financial services decreased 2.2 % to JPY123.4 billion (USD 1,112 million). Operating income decreased 20.7% to JPY 47.7 billion (USD 430 million)
Unit sales of power products totaled 2,472 thousand units, an increase of 12.6% compared to the corresponding period of the previous year. Of them, unit sales in Japan totaled 220 thousand units, decreased by 10.2%, and overseas unit sales increased 15.5% to 2,252 thousand units mainly in North America. Revenue from sales to unaffiliated customers increased by 4.6% to JPY 164.1 billion (USD 1,478 million), due mainly to increased unit sales of power products, offsetting negative currency translation effects. Operating income increased 210.0% to JPY 12.1 billion (USD 109 million). Higher profit from increased revenue in power product business and improved profit in other businesses were the major factors for this increase in operating income.
With respect to Honda's sales for the fiscal first half by geographic segment, in Japan, revenue was JPY 1,978.7 billion (USD 17,819 million), up by 4.9% from the corresponding period of the previous year. Operating income in Japan was JPY 86.7 billion (USD 782 million), up by 17.5% from the previous year, with higher profit from increased revenue and ongoing cost reduction effects, which offset negative impacts of appreciation of the yen against the U.S. dollar.
In North America, revenue decreased by 6.1% from the fiscal first half of the previous year to JPY 2,233.2 billion (USD 20,110 million), due mainly to negative currency translation effects and decreased unit sales in automobile business, although unit sales in motorcycles and power products businesses increased. Operating income in North America decreased by 12.2% to JPY 165.8 billion (USD 1,493 million) from the corresponding period of the previous year.
In Europe, revenue for the fiscal first half increased by 9.1% to JPY 514.5 billion (USD 4,634 million) compared to the corresponding period of the previous year, due mainly to increased unit sales in motorcycle, automobiles and power products businesses. Operating income in Europe increased by 37.2% to JPY 24.0 billion (USD 217 million).
In Asia, revenue increased by 22.6% to JPY 415.6 billion (USD 3,743 million) from the previous year, due mainly to continued strong sales in motorcycle and automobile businesses. Operating income also increased by 55.0% to JPY 37.4 billion (USD 337 million) from the corresponding period of the previous year.
Revenue from other regions for the fiscal first year increased by 37.4% to JPY 219.1 billion (USD 1,973 million) compared to the corresponding period of the previous year, due to increased unit sales in motorcycle and automobile businesses. Operating income increased by 70.7% to JPY 19.2 billion (USD 174 million) from the corresponding period of the previous year.
Consolidated Statements of Cash Flows for the Fiscal First Half
Cash and cash equivalents for the period from April 1, 2004 through September 30, 2004, decreased by JPY 28.6 billion (USD 258 million) from March 31, 2004 to JPY 695.7 billion (USD 6,266 million) as of September 30, 2004. The reason for the increase or decrease for each cash flow activity is as follows;
Cash flows from operating activities
Net cash provided by operating activities amounted to JPY 332.6 billion (USD 2,996 million), which included net income and depreciation for the six months ended September 30, 2004. Cash flows from operating activities increased by JPY 30.0 billion (USD 271 million) compared with the corresponding period of the previous year.
Cash flows from investing activities
Net cash used in investing activities amounted to JPY 431.3 billion (USD 3,884 million), which was mainly due to the capital expenditures and an acquisition of finance subsidiaries-receivables. Cash flows from investing activities increased by JPY 93.5 billion (842 million) compared with the corresponding period of the previous year.
Cash flows from financing activities
Net cash provided by financing activities amounted to JPY 58.6 billion (USD 528 million), which arose due to proceeds from the issuance of long-term debt. Cash flows from financing activities decreased by JPY 253.4 billion (2,282 million) compared with the corresponding period of the previous year.
Supplemental information for cash flows
FY03 FY04 FY04 FY05
Year-end 1st half Year-end 1st half
Shareholders'
equity ratio (%) 34.2 34.3 34.5 35.1
Shareholders' equity
market price ratio (%) 50.1 54.5 56.2 56.3
Repayment period (years) 3.4 4.1 3.7 4.3
Non-financial services
businesses (years) 0.5 0.5 0.4 0.4
Finance subsidiaries
(years) 19.9 31.1 17.3 42.7
Interest coverage ratio 8.7 8.3 9.8 8.0
Non-financial services
businesses 45.3 46.9 64.5 50.5
Finance subsidiaries 2.6 2.2 3.2 1.9
-- Shareholders' equity ratio: shareholders' equity / total assets
-- Shareholders' equity market price ratio: issued common stock stated at
market price / total assets
-- Repayment period: interest bearing debt / cash flows from operating
activities
-- Interest coverage ratio: (cash flows from operating activities +
interest paid) / interest paid
Explanatory notes:
1. All figures are calculated based on the information included in the
consolidated financial statements.
2. Cash flows from operating activities are obtained from the
consolidated statement of cash flows. Interest bearing debt
represents Honda's outstanding debt with interest payments, which are
included on the consolidated balance sheets. Interest bearing debt
and cash flow from operating activities for the non-financial
services businesses are obtained from the consolidated balance sheets
and consolidated statements of cash flows which are separated by
non-financial services businesses and finance subsidiaries.
Forecasts for the Fiscal Year ending March 31, 2005
The U.S. and Asian economies are expected to grow steadily, but their pace is anticipated to slowdown. Also, the management environment is still under difficult conditions because of global political and economic uncertainty, fluctuations in oil prices and currency movements. In Japan, the economic recovery has become more moderate and weak consumer spending is anticipated to continue. As a result, competition in the Japanese market is expected to intensify.
Under such circumstances, in connection with its forecasts of the financial results for the fiscal year ending March 31, 2005, Honda projects the consolidated and unconsolidated results as below:
FY2005 Forecasts for consolidated results
Billions of yen % from FY 2004
Net sales and other operating revenue 8,690 +6.5%
Operating income 620 +3.3%
Income before income taxes 600 -6.5%
Net income 447 -3.7%
FY2005 Forecasts for unconsolidated results
Billions of yen % from FY2004
Net sales 3,450 +3.9%
Operating income 123 -33.4%
Ordinary profit 196 -37.0%
Net income 135 -40.4%
These forecasts are based on the assumption that the average exchange rates for the yen to the U.S. dollar and the euro for the current fiscal year will be JPY 108 and JPY 131, respectively.
Dividend per Share of Common Stock for Fiscal Year 2005
Honda has decided to increase the interim cash dividend by 9 yen, to JPY 28 per share of common stock, and projects that year-end cash dividend will be JPY 28, increased by 5 yen. As a result, total cash dividends for the year ending March 31, 2005 will be JPY 56, increased by 14 yen.
This announcement contains forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934. Honda's actual results could materially differ from those contained in these forward-looking statements as a result of numerous factors outside of Honda's control. Such factors include general economic conditions in Honda's principal markets, foreign exchange rates between the Japanese yen and other major currencies, as well as other factors detailed from time to time in Honda's reports filed with the U.S. Securities and Exchange Commission.