Honda Q1 rises on brisk car sales, lifts forecasts
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TOKYO, July 25 -- Honda Motor Co., Ltd. today announced its consolidated financial results for the fiscal first quarter ended June 30, 2007.
First Quarter Results
Honda's consolidated net income for the fiscal first quarter ended June 30, 2007 totaled JPY 166.1 billion (USD 1,348 million), an increase of 15.8% from the corresponding period in 2006. Basic net income per Common share for the quarter amounted to JPY 91.38 (USD 0.74), an increase of 16.5% compared to JPY 78.46 for the corresponding period in 2006. One of Honda's American Depository Shares represents one Common Share.
Consolidated net sales and other operating revenue (herein referred to as "revenue") for the quarter amounted to JPY 2,931.1 billion (USD 23,780 million), an increase of 12.7% from the corresponding period in 2006. This increase in consolidated net sales and other operating revenue was primarily due to the increased unit sales in automobile business and the positive impact of the currency effects caused by the depreciation of the Japanese yen. Honda estimates that if calculated at the same exchange rate as the corresponding period in 2006, revenue for the quarter would have increased by approximately 5.9%.
Consolidated operating income for the quarter totaled JPY 221.6 billion (USD 1,799 million), an increase of 8.9% compared to the corresponding period in 2006. This increase in operating income was primarily due to the increased profit attributable to higher revenue, continuing cost reduction effects and the positive impact of the currency effects caused by the depreciation of the Japanese yen which offset the negative impact of the increased sales incentives in North America, substantially increased raw material costs and the increased depreciation expenses, SG&A expenses and R&D expenses.
Consolidated income before income taxes, minority interest and equity in income of affiliates for the quarter totaled JPY 218.2 billion (USD 1,771 million), an increase of 14.1% from the corresponding period in 2006.
Equity in income of affiliates amounted to JPY 37.0 billion (USD 300 million) for the quarter, an increase of 22.6% from the corresponding period in 2006, due mainly to the increased income from Honda's affiliates accounted for under the equity method in China.
Business Segment
With respect to Honda's sales for the fiscal first quarter by business segment, unit sales of motorcycles totaled 2,253 thousand units, which was a decrease of 5.3% from the corresponding period in 2006. Unit sales in Japan was 84 thousand units, a decrease of 5.6% from the corresponding period in 2006. Overseas unit sales was 2,169 thousand units, a decrease of 5.3% from the corresponding period in 2006, due mainly to the decreased unit sales of parts for local production at Honda's affiliates accounted for under the equity method in Asia, offsetting the positive impact of increased unit sales in other regions especially in Latin America. Revenue from external customers increased 18.8%, to JPY 368.3 billion (USD 2,988 million) from the corresponding period in 2006, due mainly to the positive impact of the currency translation effects, offsetting the negative impact of decreased unit sales. Operating income increased by 137.1% to JPY 31.1 billion (USD 253 million) from the corresponding period in 2006, due mainly to the positive impact of the currency effects caused by the depreciation of the Japanese yen, offsetting the negative impact of the increased SG&A expenses and the increased R&D expenses.
Honda's unit sales of automobiles was 946 thousand units, increased by 5.6% from the corresponding period in 2006. In Japan, unit sales was 136 thousand units, a decrease of 12.8% from the corresponding period in 2006. Overseas unit sales increased 9.5% to 810 thousand units from the corresponding period in 2006, due to the increased unit sales of CR-V in North America, Europe, Asia, the increased unit sales in other regions, and the increased unit sales of parts for local production at Honda's affiliates accounted for under the equity method in China. Revenue from external customers increased 11.1% to JPY 2,327.2 billion (USD 18,881 million) from the corresponding period in 2006, due mainly to the increased unit sales and the positive impact of the currency translation effects. Operating income decreased 1.2% to JPY 148.3 billion (USD 1,203 million) from the corresponding period in 2006, due mainly to the substantially increased raw material costs, the increased depreciation expenses, the increased sales incentives mainly in North America, the increased SG&A expenses and the increased R&D expenses, offsetting the positive impact of the increased profit attributable to higher revenue, continuing cost reduction effects and the currency effects caused by the depreciation of the Japanese yen.
Revenue from unaffiliated customers in financial services business increased 39.9% to JPY 125.8 billion (USD 1,021 million) from the corresponding period in 2006, due mainly to the increased sales of automobile business in North America, the positive impact of the currency translation effects and the increased operating lease revenues. Operating income increased 16.9% to JPY 34.2 billion (USD 278 million) from the corresponding period in 2006, due primarily to higher revenue and the positive impact of the currency effects caused by the depreciation of the Japanese yen, which offset the increased SG&A expenses.
Honda's unit sales of power products was 1,529 thousand units, a decrease of 11.3% from the corresponding period in 2006. In Japan, unit sales totaled 135 thousand units, a decrease of 1.5% from the corresponding period in 2006. Overseas unit sales was 1,394 thousand units, a decrease of 12.2% from the corresponding period in 2006, mainly due to decreased unit sales of engines in North America, offsetting the positive impact of increased sales of general purpose engines in Asia. Revenue from external customers in power product and other businesses increased by 5.5% to JPY 109.7 billion (USD 890 million) from the corresponding period in 2006, due mainly to the positive impact of the currency translation effects. Operating income decreased 27.6% to JPY 7.9 billion (USD 65 million) from the corresponding period in 2006. This was primarily due to the increased SG&A expenses and the increased R&D expenses, offsetting the positive impact of the currency effects caused by the depreciation of the Japanese yen.
Geographical Information
With respect to Honda's sales for the fiscal first quarter by geographic areas, in Japan, revenue for domestic and exports sales was JPY 1,176.2 billion (USD 9,543 million), up by 6.0% compared to the corresponding period in 2006, due primarily to the increased revenue from exports in automobile business and the positive impact of the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of a decrease of unit sales in Japan. Operating income was JPY 60.6 billion (USD 492 million), up by 23.9% from the corresponding period in 2006, due primarily to the increased profit attributable to higher revenue, continuing cost reduction effects and the positive impact of the currency effects caused by the depreciation of the Japanese yen, offsetting the substantially increased raw material costs, the increased SG&A expenses and the increased R&D expenses.
In North America, revenue increased by 7.9% to JPY 1,583.3 billion (USD 12,845 million) from the corresponding period in 2006, due mainly to the increased unit sales in automobile business and the positive impact of the currency translation effects. Operating income decreased by 15.3% to JPY 97.0 billion (USD 787 million) from the corresponding period in 2006, due primarily to the substantially increased raw material costs and the increased sales incentives in automobile business, which offset the positive impact of the increased profit attributable to higher revenue in automobile and financial services businesses, continuing cost reduction effects and the currency effects caused by the depreciation of the Japanese yen.
In Europe, revenue increased by 23.1% to JPY 400.2 billion (USD 3,247 million), from the corresponding period in 2006, due primarily to the increased unit sales in automobile business and the positive impact of the currency translation effects. Operating income increased by 59.8% to JPY 10.3 billion (USD 84 million) from the corresponding period in 2006, due primarily to the increased profit attributable to higher revenue, continuing cost reduction effects and the positive impact of the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix and the increased SG&A expenses.
In Asia, revenue increased by 36.8% to JPY 393.3 billion (USD 3,191 million) from the corresponding period in 2006, due primarily to the increased unit sales in automobile business and the positive impact of the currency translation effects. Operating income increased by 90.2% to JPY 36.9 billion (USD 300 million) from the corresponding period in 2006, due mainly to the increased profit attributable to higher revenue and the positive impact of the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the increased SG&A expenses.
In Asia, in addition to subsidiaries, many affiliates accounted for under the equity method manufacture and sell Honda-brand products. Accounting terms of some of the affiliates differ from the Company's. 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.
In other regions, revenue increased by 27.9% to JPY 226.3 billion (USD 1,836 million) compared to the corresponding period in 2006, due mainly to the increased unit sales in all of the business segments and the positive impact of the currency translation effects. Operating income increased by 42.8% to JPY 21.7 billion (USD 176 million) from the corresponding period in 2006, due mainly to the increased profit attributable to higher revenue and the positive impact of the currency effects caused by the depreciation of the Japanese yen, offsetting the negative impact of the increased SG&A expenses.
Forecasts for Fiscal Year Ending March 31, 2008
In regard to the forecasts of the financial results for the fiscal year ending March 31, 2008, Honda projects consolidated results to be as shown below:
Forecasts for Consolidated Results for the Fiscal Year ending
March 31, 2008
First half ending September 30, 2007
Yen (billions) Changes from
Fiscal Year ended
March 31, 2007
Net sales and other operating revenue 6,120 + 17.0 %
Operating income 470 + 18.5 %
Income before income taxes, minority
interest and equity in income of affiliates 480 + 35.2 %
Net income 350 + 29.0 %
Yen
Basic net income per common share 192.97
Fiscal year ending March 31, 2008
Yen (billions) Changes from
Fiscal Year ended
March 31, 2007
Net sales and other operating revenue 12,350 + 11.4 %
Operating income 880 + 3.3 %
Income before income taxes, minority
interest and equity in income of affiliates 885 + 11.6 %
Net income 625 + 5.5 %
Yen
Basic net income per common share 344.58
These forecasts are based on the assumption that the average exchange rates for the Japanese yen to the U.S. dollar and the Euro will be JPY 121 and JPY 163, respectively, for the first half of the year ending March 31, 2008, JPY 113 and JPY 148, respectively, for the second half of the year ending March 31, 2008, and JPY 117 and JPY 155, respectively, for the full year ending March 31, 2008.
Dividend per Share of Common Stock
The Board of Directors of Honda Motor Co., Ltd., at its meeting held on July 25, 2007, resolved to make the quarterly dividend of 20 yen per share of common stock, the record date of which is June 30, 2007. The total expected annual dividend per share of common stock for the fiscal year ending March 31, 2008, is 80 yen per share.
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