Honda Motor Co., Ltd. Reports Consolidated Financial Results for
the Fiscal First Quarter Ended June 30, 2005 TOKYO, July 27
/PRNewswire-FirstCall/ -- Honda Motor Co., Ltd. today announced its
consolidated financial results for the fiscal first quarter ended
June 30, 2005. First Quarter Results Honda's consolidated net
income for the fiscal first quarter ended June 30, 2005 totaled JPY
110.6 billion (USD 1,000 million), a decrease of 3.1% from the
corresponding period in 2004. Basic net income per Common Share for
the quarter amounted to JPY 119.75 (USD 1.08), compared to JPY
121.65. Two of Honda's American Depositary Shares represent one
Common Share. Consolidated net sales and other operating revenue
(herein referred to as "revenue") for the quarter amounted to JPY
2,264.5 billion (USD 20,472 million), an increase of 9.2% over the
corresponding period in 2004. Revenue was negatively affected by
currency translations, which were translations of foreign currency
denominated revenue from Honda's overseas subsidiaries into yen.
Honda estimates that if the exchange rate of yen had remained
unchanged from that in the corresponding period in 2004, revenue
for the quarter would have increased by approximately 9.5%.
Consolidated operating income for the fiscal first quarter totaled
JPY 170.3 billion (USD 1,540 million), an increase of 6.5% compared
to the corresponding period in 2004. This increase in operating
income was primarily due to increased profit from higher revenue
and continuing cost reduction effects, which offset the negative
impacts of increased selling, general and administrative (SG&A)
expenses and research and development (R&D) expenses. Equity in
income of affiliates, which is mainly attributable to Asian
affiliates accounted for under the equity method, for the quarter
amounted to JPY 21.1 billion (USD 191 million), an increase of
12.3% from the corresponding period in 2004. Consolidated income
before income taxes for the quarter totaled JPY 144.3 billion (USD
1,305 million), a decrease of 17.1% from the corresponding period
in 2004. Business segment With respect to Honda's sales in the
fiscal first quarter by business category, motorcycle unit sales
totaled 2,581 thousand units, which was the same level as the
corresponding period in 2004. Of them, unit sales in Japan
decreased 2.1% to 95 thousand units, and overseas unit sales was
2,486 thousand units, almost the same level as the corresponding
period of last year, due mainly to decreased unit sales in North
America and Other regions, offsetting the increased unit sales in
Europe, such as Spain, and in Asia, such as an increased unit sales
of parts for local production at affiliates in Indonesia. Revenue
from sales to unaffiliated customers decreased 4.0%, to JPY 263.1
billion (USD 2,379 million), due mainly to decreased unit sales,
offsetting the positive currency translation impacts of the
appreciation of the Canadian dollar and the Euro. Operating income
decreased by 40.0% to JPY 10.3 billion (USD 93 million), due mainly
to decreased profit from lower revenue, and increased R&D
expenses, which offset the positive impacts of the appreciation of
the Canadian dollar and the Euro, and ongoing cost reduction
effects. In all regions, Japan, North America, Europe, Asia and
Other regions, Honda's unit sales of automobiles increased by 8.8%
from the corresponding period in 2004 to 840 thousand units. In
Japan, unit sales of automobiles increased 8.4% to 167 thousand
units. Strong sales of minivan models, such as the fully model
changed Step Wagon and the Airwave, newly introduced in April, are
the major contributing factors to the increase. Overseas unit sales
increased 8.9% to 673 thousand units. Continued strong sales in the
U.S. as a result of the attractive vehicle models, such as Honda's
brand-new sports utility truck, the Ridgeline, and continued
favorable sales of the Pilot, the Odyssey, and the Acura RL, and
increased unit sales in Indonesia and India contributed to the
increase. Revenue from sales to unaffiliated customers increased
11.5%, to JPY 1,845.9 billion (USD 16,687 million) during the
quarter, due to increased unit sales, offsetting the negative
currency translation effects caused by the depreciation of the U.S.
dollar. Operating income increased 15.1% to JPY 133.1 billion (USD
1,204 million) due mainly to increased profit from higher revenue
and ongoing cost reduction effects, which offset the negative
impacts of the increased sales incentive in North America and
increased SG&A and R&D expenses. Revenue from sales to
unaffiliated customers in financial services increased 17.4% to JPY
68.7 billion (USD 622 million), due to the growth of the automobile
business in North America. Operating income decreased 10.8% to JPY
19.8 billion (USD 179 million), due primarily to increased funding
costs. Unit sales of power products in Japan totaled 121 thousand
units, an increase of 2.5%. Overseas unit sales was 1,361 thousand
units, increased by 7.2% and total unit sales of power products
were 1,482 thousand units, up by 6.8 % from corresponding period in
2004. Increased unit sales of general- purpose engines in North
America and Asia, generators in North America and push lawnmowers
in North America and Europe are the major contributing factors to
this increase. Revenue from sales to unaffiliated customers in
power product and other businesses increased by 1.6% to JPY 86.6
billion (USD 783 million), due mainly to increased unit sales of
power products, offsetting the negative impacts of the decreased
revenue in other business. Operating income increased 45.0% to JPY
7.0 billion (USD 64 million), due mainly to increased profit from
higher revenue in power product business, offsetting the negative
impacts of increased SG&A expenses. Geographical Segment With
respect to Honda's sales for the first quarter by geographical
segment, in Japan, revenue for exports and domestic sales was JPY
1,060.4 billion (USD 9,586 million), up by 10.7% compared to the
corresponding period in 2004, due primarily to increased unit sales
for both exports and domestic sales in automobile business.
Operating income in Japan was JPY 47.2 billion (USD 427 million),
up by 43.3%, due primarily to an increased profit from higher
revenue and ongoing cost reduction effects, which offset the
negative impacts of the increases in SG&A and R&D expenses.
In North America, revenue increased by 10.0% from the corresponding
period of the previous year to JPY 1,248.5 billion (USD 11,287
million), due mainly to the increased unit sales in automobile and
power product businesses, offsetting the negative currency
translation impacts of the depreciation of the U.S. dollar and
decreased unit sales in motorcycle business. Operating income in
North America decreased by 9.8% to JPY 72.7 billion (USD 658
million) from the corresponding period of the previous year, due
primarily to the increased sales incentive and SG&A, decreased
revenue in motorcycle business and, the negative currency effects
caused by the depreciation of the U.S. dollar, which offset the
positive impacts of increased profit from higher revenue in
automobile business and ongoing cost reduction effects. In Europe,
revenue for the quarter increased by 8.3% to JPY 297.3 billion (USD
2,688 million) compared to the corresponding period of the previous
year, due primarily to the positive currency translation effects
caused by the appreciation of the Euro and the Pound, and the
increased unit sales in automobile business. Operating income in
Europe decreased by 14.8% to JPY 12.7 billion (USD 115 million),
due mainly to increased SG&A expenses and the change in model
mix in motorcycle business, offsetting the positive impacts of the
appreciation of the Euro and the Pound and an increased profit from
higher revenue. In Asia, revenue increased by 14.0% to JPY 231.5
billion (USD 2,093 million) from the corresponding period of the
previous year, due mainly to the increases in unit sales in the
motorcycle and automobile businesses, which offset the negative
currency translation effects. Operating income decreased by 3.3% to
JPY 19.1 billion (USD 173 million) from the corresponding period of
the previous year, due mainly to the negative currency effects and
an increase in SG&A expenses, offsetting the positive impacts
of the increased profit from higher revenue and cost reduction
effects. 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. In
Other regions, revenue for the first quarter increased by 14.1% to
JPY 116.9 billion (USD 1,057 million) compared to the corresponding
period of the previous year. The positive currency translation
effects and the increased unit sales in automobile business were
the major contributing factors to the increase in revenue.
Operating income increased by 56.7% from the corresponding period
of the previous year to JPY 13.6 billion (USD 123 million), due
mainly to increased profit from higher revenue in automobile
business and the change of sales price, offsetting the negative
impacts of SG&A expenses. Consolidated Statements of Cash Flows
for the Fiscal First Quarter Cash and cash equivalents at the end
of the first quarter (the period from April 1, 2005 to June 30,
2005), decreased by JPY 47.9 billion (USD 434 million) from March
31, 2005 to JPY 725.5 billion (USD 6,559 million). The reasons 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 100.4 billion (USD 908 million) for the
quarter ended June 30, 2005, due to an increase from net income and
a decrease in trade accounts and notes receivable, which offset a
decrease in trade accounts and notes payable. Cash inflows from
operating activities decreased by JPY 22.5 billion (USD 204
million) compared with the corresponding period of the previous
year. Cash flows from investing activities Net cash used in
investing activities amounted to JPY 179.1 billion (USD 1,619
million), which was mainly due to the capital expenditures and an
acquisitions of finance subsidiaries-receivables. Cash outflows
from investing activities increased by JPY 119.4 billion (USD 1,080
million) compared with the corresponding period of the previous
year. Cash flows from financing activities Net cash provided by
financing activities amounted to JPY 23.0 billion (USD 208
million), which arose due to proceeds from the issuance of
long-term debt. Cash flows from financing activities increased by
JPY 160.0 billion (USD 1,447 million) compared with the
corresponding period of the previous year. Forecasts for the fiscal
year ending March 31, 2006 In regard to the forecasts of the
financial results for the fiscal first half ending September 30,
2005 and fiscal year ending March 31, 2006, Honda projects
consolidated and unconsolidated results to be as shown below: As
stipulated in the Japanese Welfare Pension Insurance Law, the
"Honda Employees' Pension Fund "(confederated welfare pension fund,
the "Fund"), of which the Company is a member, has obtained
approval from the Japanese Ministry of Health, Labor and Welfare
for exemption from benefits obligations related to past employee
services with respect to the substitutional portion of the Fund on
July 1, 2005. The following paragraphs illustrate how the transfer
of the benefit obligation of the substitutional portion of the Fund
is reflected to consolidated and unconsolidated financial results.
With respect to the forecast of the Company's consolidated
financial position and results of operation for the year ending
March 31, 2006, the effect of the transfer of the benefit
obligation of the substitutional portion of the Employees' Pension
Fund to the Japanese government is not reflected in accordance with
the applicable U.S. regulations. According to the regulations, the
difference between the fair value of the obligation and the assets
to be transferred to the government, which should be disclosed as a
subsidy, will be determined upon completion of the transfer to the
government of the substitutional portion of the benefit obligation
and related plan assets. At this moment, the date of such transfer
and its effect have not yet been determined. With respect to the
forecast of the Company's unconsolidated financial position and
results of operation for the year ending March 31, 2006, the
Company will recognize a JPY 91.5 billion gain on the transfer of
the benefit obligation of the substitutional portion of the Fund to
the Japanese government as an extraordinary gain in accordance with
the Japanese accounting standards. Consolidated financial forecasts
First half ending September 30, 2005 Yen (billions) Changes from
FY2005 Net sales and other operating revenue 4,630 +11.1% Operating
income 335 +0.6% Income before income taxes 305 -10.2% Net income
234 -3.1% Fiscal year ending March 31, 2006 Yen (billions) Changes
from FY2005 Net sales and other operating revenue 9,430 +9.0%
Operating income 665 +5.4% Income before income taxes 620 -5.6% Net
income 470 -3.3% Unconsolidated financial forecasts First half
ending September 30, 2005 Yen (billions) Changes from FY2005 Net
sales 1,805 +8.9% Operating income 104 +57.5% Ordinary income 155
+85.5% Net income 175 +242.2% Fiscal year ending March 31, 2006 Yen
(billions) Changes from FY2005 Net sales 3,690 +5.8% Operating
income 172 +16.6% Ordinary income 266 +25.9% Net income 262 +81.3%
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
second half of the year ending March 31, 2006 will be JPY 105 and
JPY 130, respectively, and for the full year ending March 31, 2006,
JPY 106 and JPY 132, respectively. 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, and 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. DATASOURCE: Honda Motor Co.,
Ltd. CONTACT: Tetsuo Oshima of Honda Motor Co., Ltd.,
+1-212-355-9191 x.16
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