Honda Motor Co., Ltd. Reports Consolidated Financial Results for the Fiscal Third Quarter and the Nine Months Ended December 31, 2007
TOKYO, Jan. 30, 2008 -- Honda Motor Co., Ltd. today announced its consolidated financial results for the fiscal third quarter and the fiscal nine months ended December 31, 2007.
Third Quarter Results
Honda's consolidated net income for the fiscal third quarter ended December 31, 2007 totaled JPY 200.0 billion (USD 1,752 million), an increase of 38.1% from the same period in 2006. Basic net income per common share for the quarter amounted to JPY 110.25 (USD 0.97), an increase of JPY 30.80 from JPY 79.45 for the corresponding period in 2006. 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 3,044.8 billion (USD 26,674 million), an increase of 10.0% from the same period in 2006, due mainly to increased revenue in Europe, Asia and other regions in motorcycle business and in automobile business. 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 8.9%.
Consolidated operating income for the quarter totaled JPY 276.2 billion (USD 2,420 million), an increase of 34.7% compared to the same period in 2006. This increase in operating income was primarily due to the increased profit attributable to higher revenue and continuing cost reduction efforts which offset the negative impact of increased raw material costs, increased depreciation expenses and R&D expenses.
Consolidated income before income taxes, minority interest and equity in income of affiliates for the quarter totaled JPY 260.7 billion (USD 2,284 million), an increase of 31.2% from the same period in 2006.
Equity in income of affiliates amounted to JPY 31.3 billion (USD 274 million) for the quarter, an increase of 21.3% from the same period in 2006.
Business Segment
With respect to Honda sales for the fiscal third quarter by business segment, motorcycle unit sales totaled 2,366 thousand units, a decrease of 14.4% from the same period in 2006. Unit sales in Japan totaled 54 thousand units, a decrease of 23.9% from the same period in 2006. Overseas unit sales was 2,312 thousand units, a decrease of 14.2% from the same period in 2006, due mainly to a decline in unit sales of parts for local production at Honda's affiliates accounted for under the equity method in Asia, more than offsetting favorable unit sales mainly in Brazil and Vietnam. Revenue from external customers increased 20.3%, to JPY 364.6 billion (USD 3,195 million) from the same period in 2006, due mainly to the increased revenue in Asia and other regions and the positive impact of currency translation effects. Operating income increased by 172.2% to JPY 30.3 billion (USD 266 million) from the same period in 2006, due mainly to the change in model mix, increased profit attributable to higher revenue, and positive currency effects caused by the depreciation of the Japanese yen, offsetting increased SG&A expenses.
Honda automobile unit sales totaled 991 thousand units, an increase of 8.3% from the same period in 2006. In Japan, unit sales amounted to 145 thousand units, a decrease of 7.1% from the same period in 2006. Overseas unit sales increased 11.5% to 846 thousand units from the same period in 2006, due mainly to the increased unit sales in North America with the positive effect of all-new Accord launched in September, and increased unit sales in Europe, Asia and other regions. Increased overseas unit sales of CR-V and Civic also contributed. Revenue from external customers increased 8.2% to JPY 2,449.0 billion (USD 21,454 million) from the same period in 2006, due mainly to increased overseas unit sales and the positive impact of currency translation effects. Operating income increased 37.3% to JPY 220.7 billion (USD 1,934 million) from the same period in 2006, due mainly to increased profit attributable to higher revenue, continuing cost reduction efforts, a decrease in provision for sales incentives in North America and decreased SG&A expenses, offsetting adverse effect on the elimination of unrealized profits on inventories, increased raw material costs, increased depreciation expenses and R&D expenses.
Revenue from customers in financial services business increased 30.4% to JPY 135.9 billion (USD 1,191 million) from the same period in 2006. Operating income increased 0.7% to JPY 22.9 billion (USD 201 million) from the same period in 2006, due primarily to increased profit attributable to higher revenue, offsetting the increased SG&A expenses.
Honda power product unit sales totaled 1,178 thousand units, a decrease of 14.8% from the same period in 2006. In Japan, unit sales totaled 123 thousand units, a decrease of 0.8% from the same period in 2006. Overseas unit sales totaled 1,055 thousand units, a decrease of 16.1% from the same period in 2006, due primarily to a decline of unit sales of general purpose engines that are supplied to original equipment manufacturers (OEM)* in the U.S. and Europe despite increased unit sales of general purpose engines in China. Revenue from external customers in power product and other businesses decreased by 2.1% to JPY 95.1 billion (USD 834 million) from the same period in 2006, due mainly to decreased unit sales of power products in North America. Operating income decreased 78.3% to JPY 2.2 billion (USD 20 million) from the same period in 2006. This was primarily due to the decreased revenue, increased SG&A expenses in power product business and increased R&D expenses in other businesses.
*OEM: (Original Equipment Manufacturing)
OEM refers to a manufacturing of products and components supplied for sale under a third-party brand.
Geographical Information
With respect to Honda sales for the fiscal third quarter by geographic area, in Japan, revenue for domestic and exports sales totaled JPY 1,246.1 billion (USD 10,917 million), up 1.8% compared to the same period in 2006, due primarily to the increased revenue from exports in automobile business, which offset the negative impact of the decreased unit sales of automobiles in Japan. Operating income totaled JPY 56.2 billion (USD 493 million), up 34.1% from the same period in 2006, due primarily to continuing cost reduction efforts, higher revenue and decreased SG&A expenses, offsetting increased raw material costs, increased depreciation expenses and R&D expenses.
In North America, revenue increased by 1.8% to JPY 1,640.5 billion (USD 14,372 million) from the same period in 2006, due mainly to increased unit sales in automobile business and increased operating lease revenues in financial services business, offsetting the negative impact of currency translation effects caused by depreciation of the U.S. dollars against Japanese yen. Operating income increased by 32.3% to JPY 156.3 billion (USD 1,370 million) from the same period in 2006, due primarily to the change in sales price and a decrease in provision for sales incentives in automobile business, higher revenue, continuing cost reduction efforts and the decreased SG&A expenses, which more than offset the negative impact of increased raw material costs.
In Europe, revenue increased by 33.1% to JPY 361.7 billion (USD 3,169 million), from the same period in 2006, due primarily to the increased automobile unit sales and the positive impact of currency translation effects. Operating income increased by 54.5% to JPY 5.8 billion (USD 51 million) from the same period in 2006, due primarily to higher revenue and positive currency effects caused by depreciation of the Japanese yen.
In Asia, revenue increased by 36.2% to JPY 413.4 billion (USD 3,622 million) from the same period in 2006, due primarily to increased automobile unit sales and the positive impact of the currency translation effects. Operating income increased by 89.3% to JPY 38.3 billion (USD 336 million) from the same period in 2006, due mainly to increased profit attributable to higher revenue and positive currency effects caused by depreciation of the Japanese yen, more than offsetting 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, revenue increased by 47.4% to JPY 284.6 billion (USD 2,493 million) compared to the same period in 2006, due mainly to increased revenue in all business segments and the positive impact of currency translation effects. Operating income increased by 98.1% to JPY 31.7 billion (USD 278 million) from the same period in 2006, due mainly to higher revenue and the positive currency effects caused by depreciation of the Japanese yen, offsetting increased SG&A expenses.
Nine Months Results
Honda's consolidated net income for the fiscal nine months ended December 31, 2007 totaled JPY 574.6 billion (USD 5,034 million), an increase of 38.1% from the same period in 2006. Basic net income per common share for the period amounted to JPY 316.49 (USD 2.77), an increase of JPY 88.53 from JPY 227.96 for the same period in 2006.
Consolidated revenue for the period amounted to JPY 8,947.2 billion (USD 78,382 million), an increase of 11.9% from the same period in 2006. Honda estimates that if calculated at the same exchange rate as the corresponding period in 2006, revenue for the period would have increased by approximately 7.6%.
Consolidated operating income for the period totaled JPY 784.2 billion (USD 6,870 million), an increase of 30.4% compared to the same period in 2006. This increase in operating income was primarily due to increased profit attributable to higher revenue, continuing cost reduction efforts and positive currency effects caused by depreciation of the Japanese yen, which offset increased raw material costs, and 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 period totaled JPY 748.9 billion (USD 6,561 million), an increase of 35.2% from the same period last year.
Equity in income of affiliates amounted to JPY 94.5 billion (USD 828 million) for the period, an increase of 13.3% from the same period last year.
Business Segment
With respect to Honda sales for the fiscal nine months by business segment, motorcycle unit sales totaled 6,952 thousand units, a decrease of 12.7% from the same period in 2006. Unit sales in Japan totaled 245 thousand units, a decrease of 5.0%. Overseas unit sales was 6,707 thousand units, a decrease of 12.9% from the same period in 2006, due mainly to decreased units sales of parts for local production at Honda's affiliates accounted for under the equity method in Asia, offsetting an increase in unit sales in other regions especially in Latin America. Revenue from external customers increased 17.5%, to JPY 1,114.6 billion (USD 9,765 million) from the same period in 2006, due mainly to increased revenue in Asia and other regions and the positive impact of currency translation effects. Operating income increased by 74.8 % to JPY 98.5 billion (USD 863 million) from the same period in 2006, due mainly to the increased profit on higher revenue and the positive currency effects caused by depreciation of the Japanese yen, offsetting increased SG&A expenses and R&D expenses.
Honda automobile unit sales was 2,874 thousand units, an increase of 6.6% from the same period in 2006. In Japan, unit sales decreased 12.2% to 424 thousand units. Overseas unit sales increased 10.8% to 2,450 thousand units, due mainly to the increased unit sales in North America, Europe, Asia and other regions. Revenue from external customers increased 10.4% to JPY 7,132.7 billion (USD 62,486 million) from the same period in 2006, due to the increased overseas unit sales and the positive impact of currency translation effects. Operating income increased 31.8% to JPY 582.0 billion (USD 5,099 million) from the same period in 2006, due mainly to higher revenue, continuing cost reduction efforts and positive currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of increased raw material costs, increased depreciation expenses and increased SG&A expenses and R&D expenses.
Revenue from customers in financial services business increased 35.3% to JPY 395.5 billion (USD 3,465 million) from the same period in 2006. Operating income increased 15.9% to JPY 86.4 billion (USD 757 million) from the same period in 2006, due mainly to increased profit on higher revenue, which offset increased SG&A expenses.
Honda power products unit sales was 3,965 thousand units, down 7.6% from the same period in 2006. In Japan, unit sales totaled 399 thousand units, an increase of 2.8% from the same period in 2006. Overseas unit sales decreased 8.7%, to 3,566 thousand units, due mainly to a decline in unit sales in North America. Revenue from external customers in power product and other businesses increased by 1.5% to JPY 304.3 billion (USD 2,667 million) from the same period in 2006. Operating income was JPY 17.2 billion (USD 151 million), a decrease of 40.5% from the same period in 2006, due mainly to increased SG&A expenses in power product business and the increased R&D expenses in Other businesses.
Geographical Information
With respect to Honda sales for the fiscal nine months by geographical segment, in Japan, revenue for domestic and exports sales was JPY 3,637.9 billion (USD 31,870 million), up 3.7% compared to the same period in 2006, due primarily to increased revenue from exports in automobile business and positive currency effects, which partially offset the negative impact of decreased automobile sales in Japan. Operating income was JPY 190.2 billion (USD 1,666 million), up 19.0% from the same period in 2006, due primarily to increased profit attributable to higher revenue, continuing cost reduction efforts, decreased SG&A expenses and positive currency effects, which offset the negative impact of increased raw material costs, increased depreciation expenses and R&D expenses.
In North America, revenue increased by 6.2% to JPY 4,781.0 billion (USD 41,884 million) from the same period in 2006, due mainly to increased sales in automobile business, increased operating lease revenues in financial services business and positive impact of the currency translation effects. Operating income increased by 12.5% to JPY 369.4 billion (USD 3,237 million) from the same period in 2006, due primarily to increased profit on higher revenue, continuing cost reduction efforts and positive currency effects.
In Europe, revenue increased by 27.0% to JPY 1,152.8 billion (USD 10,099 million) compared to the same period in 2006, due primarily to increased automobile unit sales and the positive impact of the currency translation effects. Operating income increased by 70.5% to JPY 32.8 billion (USD 288 million) from the same period in 2006.
In Asia, revenue increased by 35.1% to JPY 1,222.3 billion (USD 10,708 million) from the same period in 2006, due primarily to the increased automobile sales and the positive impact of currency translation effects. Operating income increased by 87.6% to JPY 108.7 billion (USD 952 million) from the same period in 2006.
In other regions, revenue increased by 37.5% to JPY 778.8 billion (USD 6,823 million) compared to the same period in 2006, due mainly to increased motorcycle and automobile sales and the positive impact of the currency translation effects. Operating income increased by 58.8% to JPY 83.7 billion (USD 733 million) from the same period in 2006.
Forecasts for Fiscal Year Ending March 31, 2008
With regard to the forecasts of financial results for the fiscal year ending March 31, 2008, Honda projects consolidated results as shown below:
FY2008 Forecasts for Consolidated Results
Fiscal year ending March 31, 2008
Yen (billions) Changes from FY2007
Net sales and other operating revenue 12,150 + 9.6%
Operating income 920 + 8.0%
Income before income taxes, minority
interest and equity in income of
affiliates 915 + 15.4%
Net income 690 + 16.5%
Yen
Basic net income per common share 380.25 --
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 105 and JPY 155, respectively, for the fiscal fourth quarter ending March 31, 2008, and JPY 114 and JPY 161, 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 January 30, 2008, resolved to make the quarterly dividend of JPY 22 per share of common stock, the record date of which is December 31, 2007. It also intends to distribute year-end cash dividends of JPY 22 per share, the record date of which will be March 31, 2008. The total projected annual dividend per share of common stock for the fiscal year ending March 31, 2008, together with the first quarter and the second quarter cash dividends of JPY 20 and JPY 22 per share, respectively, is JPY 86 per share, an increase of JPY 19 per share from the annual dividends paid for the year ended March 31, 2007.
This announcement 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's assumptions and beliefs taking into account information currently available to it. Therefore, please be advised that Honda's actual results could materially differ from those described in these forward-looking 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.