Honda Motor Company, Ltd.

I thank you very much for taking time out of your busy schedule to attend our press conference. We would now like to start Honda Motor Company's press conference for financial results for fiscal year to March 2023. Though COVID-19's category has been changed to Class 5, we have decided to continue to hold this briefing online as well. First of all, allow me to introduce the attendees today. We have Mr. Shinji Aoyama, Director, Executive Vice President and Representative Executive Officer, Chief Operating Officer. This is Aoyama. Good to see you. And then we also have Mr. Eiji Fujimura, Executive Officer, Chief Financial Officer. This is Fujimura. Good to see you, everybody. Now, Mr. Aoyama will first present an overview of the financial results of financial year to March 2023 and forecast for FY24. And then Mr. Fujimura will present the details. Over to you, Mr. Aoyama.

Good afternoon, everyone. I'm Aoyama. I'm the Executive Vice President starting April. Thank you very much for your participation today despite your busy schedule. So let me explain the financial results of the FY2023 and a summary of the FY2024 forecast. Starting with the highlight of the financial results, I will explain the progress of the profitability structures and its reinforcement. According to the FY2023 results, we sold 3.69 million cars, The previous expectations were set at 3.85 million. Operating profit was 839.3 billion yen, whereas the previous forecast was 870 billion yen. The efforts on fixed cost reduction, pricing that reflects improved values of the product, and so on, helped strengthen our operational structures. As a result, we maintained the operating profit margin of about 5 percent, which is the level of the previous forecast. As for the FY2024 forecast, we will further improve the operational structures that we have built up until now, and we will strengthen Supply chains, such as the stable procurement of the semiconductors, will improve operating ratio of the air factories. And we will plan to sell 4.35 million cars with the expected operating profit of 1 trillion yen, which will be the best profit ever. Cash generated will be invested to provide resources for electrification going forward, and we'll stay engaged in shareholder return programs. In specific, in FY2024, we plan to increase the dividends to 150 yen per share, which will be the highest ever. In addition, in the Board of Directors' meeting today, we have made a decision for share buybacks for the amount of 200 million yen. Toward FY2026, we will continue to reinforce our operational structures altogether in unity, aiming to achieve the operating profit margin above 7%. Let me continue to explain the automobile businesses' situations in main markets. In April 2023, there had been a major impact of the COVID-19 pandemic in China and the supply shortage of semiconductors until our third quarter, due to which the unit sales dropped below the year before. During the three months of our fourth quarter, supply situations of the semiconductors gradually improved. Thus, the unit sales resulted better year on year in the United States. In China, the tax protection measures ended which caused a negative impact on the unit sales. Thus, the results dropped significantly lower year on year. In terms of the unit sales of FY2024, although the outlook in China is rather unclear, in the global market, we can enjoy the favorable model cycles that continues from last year, and we'll aim to expand our unit sales based on the resumption of the supplies in the market thanks to the improved operating ratio of the forecast. Regarding our actions for electrification, we started our discussions with the POSCO for a comprehensive partnership in order for achieving carbon neutrality. In the Shanghai Motor Show in China, we exhibited the world premiere of the second set of the EN series called EN-P2 prototype and EN-S2 prototype, as well as the third set of the concept model EN-SUV-SU. Next, moving on to the motorcycle business situations. For the FR 2023, the unit sales increased year on year in the main markets. During three months of the fourth quarter, the unit sales had dropped year on year in India and Vietnam. However, in Indonesia, although we had the supply shortages of the semiconductors, we were pleased the model offerings and utilized the alternative parts, which then helped a significant decrease of unit sales. Thus, the total resulted in better than the last year, year-on-year. As for the unit sales, for 2024, we plan to achieve higher results year-on-year based on decreasing unit sales in India and Indonesia. Let's look at the overview of the consolidated financial results of April 2023. In addition to the reduction in unit sales and the production of the bill due to the impact by semiconductor shortages and COVID-19 pandemic in China, we had incremental production costs caused by the soaring material prices and inflationary impact. Nevertheless, Thanks to the pricing scheme that reflects commercial values of the products, increasing unit sales over the cycles, and the foreign currency exchange impact, we achieved the operating profit of 839.3 billion yen. The profit for the year attributable to the owner of the parent was 695.2 billion yen. status of the unit sales, PL, are described here. With regard to the forecast of consolidated data performance of FY2024, although incremental production costs and the inflationary impact, yen appreciation impact, and et cetera, may exist, we have been working on the pricing scheme reflecting commercial values of the products and further strengthening of the operational structures, plus the increase of the production and unit sales of our mills. Altogether, we plan to hit 1 trillion yen operating profit. That will be the highest ever. The profit for the year attributable to the owner of the parent is planned at 800 billion yen. Assumed exchange rate is 125 yen for a dollar for the full year basis. You can see the unit sales and the PL plans on the slide. Let me explain about the dividend. Annual dividend for the FY23 is 120 yen per share, and the year-end dividend is 60 yen per share. As for the expected annual dividend for FY2024, we will add ¥30 to the amount of FY2023. Thus, it will be ¥150 per share, the highest dividend so far. In the Board of Directors' meeting today, we made a decision of share buybacks. For the purpose of improving capital efficiency, of executing flexible capital policy and so on, We will buy back our shares up to the total amount of 200 billion yen of acquisition values.

Next, Mr. Fujimura, CFO, 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 the fiscal year 2023, in motorcycle operations, unit sales grew year on year, particularly in Asia, to 18.757 million units. Automobile sales came to 3.687 million units, mainly due to decline in China and in North America. In power products operations, unit sales came to 5.645 million units, mainly due to decline in North America. Next, I'd like to explain the factor analysis of the pre-tax profit for the four quarters compared to the previous fiscal year. Pre-tax profit was 938.1 billion yen, which was lower by 131.9 billion yen compared to the previous fiscal year. Operating profit was 838.9.3 billion yen, which is lower by 31.8 billion yen on that 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 lower profit and financial operations led to income decline of 109.1 billion yen. Selling price and cost factors. While there was effect from pricing in line with the product value, Due to surging material prices, as well as effect from inflation, it resulted in a decline in profit by 27.4 billion yen. Expenses. Due to increase in quality-related expenses and selling expenditures, this gave us a negative impact of 132.5 billion yen. R&D expenses led to profit decline of 58.5 billion yen, and currency effect resulted in positive impact of 295.9 billion yen. Next, to explain the sales revenues in operating profit by business segment, for motorcycles, operating profit was 488.7 billion yen, the record high. Automobiles operations profit was 42.0 billion yen. Operating profit from financial services were 285.8 billion yen. And for power products business and other businesses, operating profit came to 22.8 billion yen. Next, I will explain the cash flow. Free cash flow operating entities for fiscal year 2023 came to 685.8 billion yen. And the end-of-term balance of net cash came to 2,758,000 yen. Next, I'd like to talk about the consolidated financial forecast for fiscal year 24. Firstly, speaking of Honda Group's unit sales compared to the previous fiscal year, in motorcycle business, considering the growth mainly in Asia, forecast is for 19,180,000 units. In automobiles, We are putting it at 4.35 million units, considering the growth mainly in North America. And in power products, 4.75 million units in view of the declines in North America. Next, I'd like to explain the factual analysis of pre-tax profit compared to the actual results from last year. Pre-tax profit is forecast at 1 trillion and 185 billion yen, up 246.8 billion yen from the previous year's results. Operating profit is forecast at 1 trillion yen up 160.6 billion yen from last year's results. To explain the factors behind operating income, impact from sales is forecast at positive 440.6 billion yen due to growth in unit sales of automobiles and motorcycles. Selling price and cost impact is positive 265.0 billion yen due to effect from our ongoing pricing in line with product value, though there has been some impact from inflation as well. Expenses impact is expected to be negative 217.0 billion yen due to increases in selling expenses. R&D expense impact is negative 60.0 billion yen. and currency effect is forecast at negative of 268.0 billion yen. Lastly, our forecast for capital expenditure, depreciation and amortization, and R&D expenditures for FI24 are as shown. This completes my explanation. Thank you very much for your attention. Thank you very much for your attention. Then now we'd like to proceed to the Q&A session. We would like to take questions through Zoom, which you have been informed in advance. And due to limited time, we'd like to limit it to up to two questions per person we ask for your cooperation. Now, if you have any questions, please use the raise your hand button to let us know.