Honda Motor Company, Ltd.

Thank you very much for taking time out of your busy schedule to attend our press conference today. We would now like to start our Honda Motor Company Limited's fiscal year 2022 third quarter financial results press conference. I am Okamoto from Corporate Communications. I will be the facilitator today. Thank you. First of all, allow me to introduce the presenters today. Director, Executive Vice President and Representative Executive Officer, Mr. Seiji Kuraisi. Good to see you. Director, Senior Managing Executive Officer, Mr. Kohei Takeuchi. This is Takeuchi. Good to see you. Then Mr. Kuraisi will first present the third quarter financial results. Over to you, Mr. Kuraisi. I would like to present to you the outline of the financial results for the third quarter and the four-year forecast for fiscal year ending in 2022. I would like to start with the situations in key markets. The total market demand in Japan was lower than the same period last year due to impact from factors including supply shortage of semiconductors. Honda, though we've seen some growth in models such as Brazil in the cumulative results till third quarter, showed lower sales compared to the same period last year. Inbox ranked number one in the new car unit sales among K cars in the calendar year 2021. While the total market during the fiscal year ending in 22 showed firm demand, we believe that it will continue to be impacted by factors including semiconductor supply shortage and the resurgence of the pandemic. Honda will strive to recover its production and will maintain its previous forecast. Next, taking a look at the total U.S. market, while demand recovered under the economic stimulus measure, it was still impacted by factors including semiconductor supply shortage, so the demand for the cumulative three quarters was almost flat compared to the same period last year. Honda's unit sales for the three quarters surpassed the results of the same period last year due to increase in light truck models. But if you look at the three-month, just through the quarter by itself, it was lower than the same period last year due to impact from semiconductor supply shortage. And the Civic, by the way, was named the 2022 North American Car of the Year, by the way. We see the total market for the fiscal year ending in 22 to sustain strong demand, but still we expect that the impact from semiconductor supply shortage and the pandemic to be significant, we believe. Honda has revised its previous forecast downward, considering our immediate production status. Now, looking at the Chinese overall market, demand recovered thanks to the economic stimulus measures by the government, but the impact from semiconductor shortage resulted in a lower demand compared to the same period last year. Honda has expanded sales of XRV and saw some effect from launching the new Integra, but still our sales was lower than that in the same period last year. The total market for the calendar year 22 is expected to surpass the previous year with solid demand, though the impact from semiconductor shortage remains. Honda has revised its forecast upward considering the most recent sales situation. In China, in January, Dongfeng Honda Automobile announced the construction of a factory dedicated to electric vehicles. We will continue to further expand our electromotive vehicle product range and provide further attractive products. Now turning to motorcycle business, total market, while impacted by the COVID-19 pandemic, is still showing recovery in demand in many markets. Honda also showed better results in many countries for the cumulative three quarters compared to the same period last year, but the numbers were lower in countries such as India and Vietnam due to the impact of resurgence of COVID-19 pandemic. The total market for the fiscal year ending in 2022 is expected to see solid demand, but we expect that the impact from the resurgence of pandemic will still remain. While Honda plans for sales volume is surpassing that of the previous fiscal year, we have revised our forecast downward from the previous forecast in view of the sales status in India and the impact from semiconductor supply shortage. Next, I would like to present the summary of the cumulative results up to the third quarter. While the automobile unit sales declined due to supply shortage of parts including semiconductor and impacted by the surging material prices, thanks to cost reduction, curbing of incentive, and positive Forex impact, our operating profit grew by ¥224.6 billion to ¥671.6 billion. Also, the profit attributable to the owners of the parent company grew by 138 billion yen to 582.1 billion yen. Unit sales and income statement highlights are as shown on the screen. moving on to the consolidated financial forecast for the fiscal year ending in 22 compared to our previous forecast covet 19 pandemic is spreading again supply shortage of parts including semiconductor continues and further surging prices of material continues thus the environment surrounding our business is expected to remain challenging but we are making further efforts to curb our sga expenses and incentive so as to enhance our profitability. So we have revised our operating profit upward by 140 billion yen to 800 billion yen and also revised our profit for the period attributable to the owners of the parent company by 115 billion yen to 670 billion yen. This unit sales and income statement highlights are as shown. Next about dividend. Forecast for the full year dividend for the fiscal year ending in 2022 is 110 yen, unchanged from the previously published forecast. I would now finally like to explain the key points of the results for the third quarter for fiscal year ending in 2022. For the three-quarter year-to-date results for the year ending in 22. Regarding supply shortage of semiconductors, with the cooperation from our suppliers, we have adjusted our inventory allocation around the world and made changes to alternative parts. So we have made some improvement compared to the previous forecast. Compared to the previous fiscal year, though we have seen decrease in automobile production volume and impact from surging prices of materials, we have made all-around efforts and have absorbed all of the impact and have been able to attain higher revenues and higher earnings. Combined with our efforts so far to solidify our existing business, which have given us toughness or resilience in the face of reduced production, the strength of our frontline Genba operations, capable of responding promptly to the ever-changing environment production sales situations, has shown its true benefits, we believe. For the fiscal year 2022 full-year performance forecast, considering the flooding in Malaysia which happened in the fourth quarter and the impact of reduced production due to the wave of Omicron variant, we are keeping the full-year automobile unit sales forecast unchanged. While the environment surrounding our business is expected to be challenging, including surging prices of raw materials, we will further reinforce our structure for generating earnings, and we are revising our full-year performance forecast upward. For the next fiscal year, we expect that the impact of semiconductor shortage will linger, but we strive to further strengthen the business foundation for profitability, which we have built, and we ensure that we are well prepared for the future and we may aim for the further growth.

And next, Takeuchi will give the details.

And I'd like to begin the explanation. First, Honda Group unit sales for FY22 nine months was... Motorcycles due to increase in mainly Asia, unit sales increased to 12,775,000 units. Automobiles due to decline in China and North America, unit sales was 3 million units. Life creation due to increase in mainly North America and Europe was 4.5 million units. And next, FY22, three quarters, nine months, change in profit before income taxes. Profit before income taxes was 845.2 billion yen. up 186.5 billion yen from the same period last fiscal year. Operating profit was 671.6 billion yen, up 224.6 billion yen from the same period last fiscal year. Operating profit excluding currency translation effect was 97.7 billion yen. Breakdown was Revenue model mix, etc., despite the drop in automobile unit sales due to the effect of controlling incentives and others, was plus 81.4 billion yen. Regarding cost reduction, etc., despite impact of the surge in raw material costs due to cost reduction and price increase effects, was minus 9.7 billion yen. SG&A was plus 98 billion yen due to cost reduction effect such as warranty expenses. And next, sales revenue operating profit by business segment. Motorcycle business operating profit was 282.3 billion yen. Automobile business operating profit was 188.5 billion yen. Financial services business operating profit was 258.1 billion yen. Combined operating profit of automobile business and financial services for automobiles was 437.2 billion yen. And next, life creation and other businesses. Operating loss was 7.4 billion yen, of which aircraft and aircraft engine operating loss was 23.6 billion yen. Moving on to cash flows. FY22, in nine months, free cash flow of non-financial services business was 178.3 billion yen. Cash and cash equivalent at the end of the period was 2,416.8 billion yen. And moving on to FY22, consolidated forecast. Honda Group unit sales. Motorcycles forecast is revised downward from the last forecast. to 17.04 million years, reflecting drop in mainly Asia. Automobile business, despite shortage in semiconductor supply and research of COVID-19 infections, the previous forecast remains unchanged, i.e. 4.2 million units. Life creation business, reflecting mainly the drop in North America, we are forecasting 5.95 million units. Let me proceed to explain FY22 forecast change in profit before income taxes compared to the previous forecast. Profit before income taxes is forecasted to be 1 trillion 20 billion yen, up 160 billion yen from the previous forecast. Operating profit is forecast to be 800 billion yen, up 140 billion yen from the previous forecast. Operating profit excluding currency effects is... Plus 130 billion yen breakdown is the revenue model mix, etc. Despite drop in consolidated automobile unit sales, the low inventory and incentives control resulted in a forecast that is up 40 billion yen. Regarding shortage of semiconductor supply, though we have seen improvement in the nine months versus the previous forecast, there was a flood in Malaysia in the fourth quarter and drop in production due to the research of COVID-19 pandemic. Yet, group automobile unit sales forecast remains unchanged, i.e., 4.2 million units for the full year. Consolidated automobile unit sales in North America is down due to the research in COVID-19 cases. And next is SG&A is up 111 billion yen and due to other expenses being kept low and in addition reduced warranty expenses. and the FY forecast compared to the actual results of last fiscal year profit before income taxes is up 105.9 billion yen. Operating profit is forecast to be plus 139.7 billion, excluding currency effects. The major breakdown in items are revenue model and mix, despite degrees in automobile unit sales due to incentive control, etc., is up 74.7 billion. Cost reduction, etc., despite the impact of surging material costs, We saw a cost reduction in price increase effects, and these combined cost reduction is 35 billion yen minus. And lastly, FY22 capital expenditure depreciation R&D, the forecast is as shown. This concludes my presentation. Thank you for your attention.