Honda Motor Company, Ltd.

I thank you very much for taking time out of the busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited's financial results briefing for third quarter of fiscal year to March 2023. First of all, allow me to introduce the attendees today. Mr. Eiji Fujimura, operating executive and head of accounting and finance supervisory unit. Good to see you, everyone. Mr. Masao Kawaguchi, General Manager of Accounting Division, Accounting and Finance Supervisory Unit. Good to see you, everyone. Then Mr. Fujimura will first present an outline of the third quarter financial results and the forecast for fiscal year to March 2023. Then Mr. Kawaguchi will present the details. Over to you, Mr. Fujimura.

First of all, I would like to thank all our customers around the world for their loyalty to Honda products and all our stakeholders who support Honda's efforts. We sincerely apologize for the inconvenience caused to our customers who are waiting for Honda products due to the current vehicle production delay. We will do our best to deliver our products to our customers as soon as possible and seek for your understanding. I'll now explain our financial results for FY 2023 third quarter and FY 2023 financial forecasts. First, the key points of our financial results. The current business environment continues to be difficult. In the third quarter, production and unit sales of automobiles decreased from the same period of the previous year. due to the impact of the COVID-19 pandemic in China and semiconductor supply shortages. In addition, manufacturing costs continue to rise due to soaring raw material prices and inflation. Under these circumstances, Honda made company-wide efforts to further improve its earnings structure and secured a 6.3% operating margin for the fiscal year 23 third quarter. The motorcycle business posted record high operating profit and margin for the second consecutive quarter. For the full year forecast, we have revised downward automobile unit sales. Despite upward pressure on manufacturing costs, we will maintain our previous forecasts for both operating profit and profit for the year by further improving our business structure. Despite the unfavorable business environment, we believe our earnings structure is steadily improving. And in light of our current profitability, cash level, and future fund requirements, the Board today approved a resolution to acquire 70 billion yen of our own shares. When added to the 100 billion yen already acquired this fiscal year, the total comes to 170 billion yen. Honda will continue to accelerate its efforts toward electrification and new growth to enhance corporate value. Next, I will explain the status of our automobile business in major markets. In the first nine months of the fiscal year, unit sales in major markets declined from the same period year on year. The third quarter period was affected by semiconductor supply shortages and pandemic in China. Unit sales in Japan were higher, while sales in the U.S. and China were lower than in the same period of the previous year. In Japan, the N-Box was the number one selling new car. And the Freed was the number one selling minivan for the calendar year 2022. And in North America, the Acura Integra was named 2023 North American Car of the Year. We have revised downward our previous sales forecast for fiscal year 2023, taking into account the current production and sales condition. In addition, we announced plan to launch a new light commercial EV in spring 2024, utilizing the features of the N-VAN. In the U.S., we announced establishment of a joint venture with LG Energy Solutions to produce EV batteries and the signing of a basic agreement with GSUSA to collaborate on high-capacity, high-output lithium-ion batteries. Next, motorcycle business. In the first nine months, unit sales exceeded year on year in major markets. In the third quarter, Unit sales in major markets exceeded that of the same period last year due to the replacement of sales models, utilization of alternative parts, and the effect of new model launches mainly in Vietnam, despite the effects of semiconductor supply shortages and other factors. In Vietnam, unit sales reached a record high in October following September. And in Brazil, unit sales reached 1 million units for the first time in calendar year since 2014. We have upwardly revised our previous sales forecast for FY23, reflecting the current strong sales trend. As forerunners of the global launch of electric motorcycles, Honda announced the E-M-Y-E in Europe in November, and three commuter EB models in China in January. Next, our overview of FY23 nine months results. Despite decrease in automobile production and unit sales due to semiconductor shortages and pandemic in China, plus higher manufacturing costs due to surging raw material prices and inflation, Operating profit increased 62.2 billion yen to 733.9 billion yen year-on-year due to price increases commensurate with improved product value, increased motorcycle unit sales, and foreign exchange. Profit for the year amounted to 583.1 billion yen, up 1 billion yen from the same period last year. Unit sales and income statement are as shown. Next, FY23, consolidated financial forecast. Despite decline in automobile unit sales and upward cost pressure due to inflation, We are maintaining our previous forecast of 870 billion yen for operating profit, reflecting price increases commensurate with improved product value, increase in motorcycle unit sales mainly in China, and company-wide efforts to further improve profitability. The profit for the year forecast of 725 billion yen is also maintained. Exchange rate assumptions for the fourth quarter and full year are 130 yen and 135 yen to the dollar, respectively. Unit sales and income state are as shown.

Next, I will cover the dividend information. The prospects for fiscal year dividend for fiscal year 2023 is at 120 yen per share, unchanged from our previous announcement. At the board of directors meeting held today, we have resolved to acquire own stock with the objective of enhancing capital efficiency and enabling flexible capital strategies. We will acquire own stock up to the maximum total amount of 70 billion yen. Next, Mr. Kawaguchi, General Manager of Accounting Division, will explain the details of the financial results and forecast. Allow me to start the explanation. To begin with, Honda Group's unit sales for nine months of the fiscal year 2023 In motorcycle operations, unit sales grew year on year, particularly in Asia, and came to 14,285,000 units. Automobile sales came to 2.74 million units, mainly due to decline in China and North America. In power products operations, unit sales came to 4,121,000 units, mainly due to decline in North America. Next, I'd like to explain the changes of our pre-tax profit for the three quarters compared to the same period last year. Pre-tax profit was 859.3 billion yen, which was higher by 14.1 billion yen compared to the same period last year. operating profit was 733.9 billion yen, which was higher by 62.2 billion yen on the year. To give you a factor analysis of the operating profit, impact from sales. Though there was an increase in motorcycle unit sales, declines in automobile sales volume and in financial operations, led to income decline of 97.1 billion yen, impact from selling price and cost. While there was an effect from pricing in line with the product value, Due to surging material prices and inflation, it resulted in a decline in profit by 17.1 billion yen. Next, expenses. Due to increase mainly in selling expenditures and other factors, this gave us a negative impact of 65.6 billion yen. R&D expenses led to a decline of 11.5 billion yen. And currency effect resulted in 253.7 billion positive impact. Next, to explain the sales revenues and operating profit by business segment, for motorcycles, operating profit was 376.5 billion yen. Automobile operations profit was 112.9 billion yen. operating profit from financial services was 220.3 billion yen, and for power products business and other businesses, operating profit came to 24.1 billion yen. Next, I will explain the cash flow. Free cash flow of the operating entities for the third quarter of FY23 came to Next, I would like to talk about the consolidated financial forecast for FY ending in 2023. Firstly, speaking of Honda Group's unit sales, since the previous forecast, in motorcycle business, considering the growth mainly in Asia, forecast is for 18,730,000 units. In automobiles, 3.85 million units, considering the decline mainly in China. And in power products... 5.58 million units in view of the declines in Europe and in Asia. Next, I would like to explain the factor analysis of pre-tax profit compared to the actual results from last fiscal year. Pre-tax profit is forecast at 1 trillion and 80 billion yen, up 9.8 billion yen from the previous year's results. Operating profit is forecast at almost the same level as last year's result. To explain the factors behind the operating profit, impact from sales was negative, 5.2 billion due to reduced income and financial services, though motorcycle unit sales grew. Selling price and cost impact is negative 93.0 billion yen due to surging material prices and inflation, though there was good effect from pricing in line with product value. Expenses impact is expected to be negative 120.0 billion yen due to increase in the quality-related expenses and selling expenses. R&D expense impact is negative 52.0 billion yen, and currency effect is forecast at positive of 269.0 billion yen. Next, the changes since our previous forecast. We are keeping our pre-tax profit and operating profit forecast unchanged. to explain the factors affecting operating profit. Impact from sales is negative 47.0 billion yen, mainly due to decline in automobile unit sales. Selling price and cost impact is positive 17.0 billion yen, thanks to effect from pricing in line with product value, though there is headwind of inflation adding to cost rises. Expenses impact is positive 32.0 billion yen due to declining quality related expenses. R&D expense impact of positive 15.0 billion yen. Currency impact of negative 17.0 billion yen. Lastly, since our previous forecast, our forecast for capital expenditure depreciation and amortization on the expenditures for FY23 remains unchanged. This completes my explanation. Thank you very much for your attention.