Honda Motor Company, Ltd.

Thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited's financial results briefing for second quarter of fiscal year 2024. First of all, allow me to introduce the attendees today. Mr. Shinji Aoyama, Director, Executive Vice President and Representative Executive Officer and Chief Operating Officer. Good to see you, everyone. and Mr. Eiji Fujimura, Executive Officer, Chief Financial Officer. Good afternoon, everyone. Mr. Aoyama will first present an overview of the financial results of first half of financial year 2024 and four-year forecast. Then Mr. Fujimura will present the details for the results and the forecast. Over to you.

Thank you very much for your usual understanding on Honda's business activities. I will explain the financial results of the second quarter of our FY 2024 and its full year forecast. Let me touch upon the highlight of the results. Regarding the cumulative results until second quarter FY2024, we had high profits in motorcycle businesses in addition to the significant improvements of profitability in automotive businesses where any production volume had recovered mainly in North America. and delivered competitive products to customers. Operating profit increased by 243.1 billion yen to 696.5 billion yen and operating profit margin was 7.2%. Free cash flow of the operating companies excluding that of the financial businesses reached 732.9 billion yen, way exceeding the level last year on air. In terms of the business forecast of the FY2024, although tough market environment exists in China and Asia, we will revise the previous forecast of sales, revenue, operating profits and the profit for the period, reflecting additional strength in the profitable structures as well as the foreign currency impact. For shareholders' returns, we plan to increase the dividend by 24 yen from the highest ever dividend of the 150 yen until the share split to 174 yen. We announced share buybacks at the financial press conference on May 11th, 2023. And the amount of the share buybacks as of October 31st was at 163.5 billion yen for the upper limit of 200 billion yen. Let me explain about automobile businesses in the main markets. In the United States, demands are solid. Semiconductors have been secured and productions have recovered. Thus, with the highly competitive new models that were launched last year, the result marked significantly higher year on year. In China, because of the impacts by expanding the energy vehicle market and intensifying the price competition, the results ended below last year. In terms of a sales outlook for the FY2024, we anticipate incremental unit sales in Japan. Nevertheless, tough market environment in China would continue for some time now, so we would like to down-revise the previous forecast. However, overall, we will achieve higher results year on year. Speaking of our options for electrification, we announced the launch of new EVs, Acura GTX and Honda Prologue, early 2024. In North America, we agreed with BMW and Ford to establish a new company, Charge Escape, in order to provide energy services that will contribute to stable power grid network by utilizing EVs. In Japan, we concluded a memorandum of understanding with Mitsubishi Corporation in order to explore commercialization of energy management businesses. Next, let me talk about motorcycle businesses. In the first half of the year, fiscal year, overall motorcycle business performed higher year-on-year due to incremental unit sales thanks to the solid demands in Indonesia and Europe. During three months of second quarter, we had more unit sales due to solid demands in Indonesia and Brazil. However, overall businesses fell short of the same time last year because of the unit sales decline. due to economic slowdown and so on in Vietnam and China. Regarding sales expectations for FY2024 reflecting decline in Vietnam and China, we will down revise the previous forecast. On the whole, the business will be at the equivalent level year on year. Speaking of our actions for electrifications, in the Japan Mobility Show the other day, we exhibited a SCE concept, which employs two sets of the Honda Mobile Power Pack E for replacement batteries. Next, this is the outline of the first half of FY2024. Despite impacts by around expenses, thanks to incremental unit sales and the pricing that reflects improved commercial values, the operating profit marked at 696.5 billion yen, up by 243.1 billion yen on year. Profit attributable to the owner of the parent during the first half, it was 616.3 billion yen, up by 277.7 billion. This is the focus of the consolidated business performance of FY2024. Despite a tough modern environment in China and Asia, as well as the increase of warranty expenses that occurred in the first half, Reflecting the fortified earnings structure and forex impact, we have revised the operating profit expectations to 1.2 trillion yen, up by 200 billion yen. Profit for the period attributable to the owners of the parent is expected to be 930 billion yen, up by 130 billion. Foreign currency assumption is set at 140 yen for dollar in the second half as well as for the full year. Expectations of unit sales appeal are shown on the slide. Interim dividend for FY24 is expected to be 87 yen per share, and the dividend for the full year will be 174 yen, up by 24 yen from the previous forecast of 150 yen. That was based on the criteria before the share splitting. Next, Mr. Fujimura will explain details of the financial results and forecast.

Okay, then allow me to start the explanation. To begin with, Honda Group's unit sales for the first half of fiscal year 2024 In motorcycle operations, unit sales grew year on year, mainly in Europe, to 9,262,000 units. Automobile sales came to 1,934,000 units, mainly due to growth in North America. And in power products operations, unit sales came to 1,826,000 units, mainly due to the decline in North America. Next, I would like to explain the factor analysis of pre-tax profit for first half here compared to the same period last year. Operating profit grew by 243.1 billion yen compared to the same period last year. To give you a factor analysis of the operating profit, impact from sales was an increase of 219.2 billion yen due to unit sales growth in automobiles. Selling price and cost factors was an increase of 205.7 billion yen due to effect of pricing in line with the enhanced product value and low prices of precious metals and other raw materials. Expenses gave us a negative impact of 214.3 billion yen due to an increase in warranty expenses and other expenditures. R&D expenses led to profit decline of 30 billion yen, and currency effect resulted in a positive impact of 62.4 billion yen. Pre-tax profit led to an increase of 363.4 billion yen resulting from evaluation gains of foreign currency denominated bonds and interest received. Next, to explain the sales revenues and operating profit by business segment, Operating profit was 253.3 billion yen for motorcycles, 301.3 billion yen for automobiles, 137.0 billion yen for operating profit from financial services, and 4.8 billion yen for power products, business, and other operations. Next I will cover the cash flow situation. The free cash flow of the operating entities excluding financial operations for the first half of fiscal year 24 came to 732.9 billion yen and the end of term balance of net cash at the end of first half came to 3,356.6 billion yen. Next, I would like to talk about the forecast for fiscal year 2024. Firstly, speaking of Honda Group's unit sales, compared to the previous forecast, in motorcycle operations, considering the decline mainly in Asia, forecast is for 18,080,000 units. In automobiles, 4.1 million units, considering the decline mainly in Asia. And in power products, 3.85 million units in view of the decline mainly in North America. Next, I would like to explain the factor analysis of pre-tax profit compared to the actual results from last year. First, operating profit is forecast at 419.2 billion yen up from last year's results. To explain the contributing factors, impact from sales is forecast at positive 371.6 billion yen due to growth in unit sales of automobiles. Selling price and cost impact is positive 394.0 billion yen due to effect from our pricing in line with enhanced product value as well as lower raw material prices. Expenses impact is expected to be negative of 321.4 billion yen due to warranty related expenses and increase in selling expenses. R&D expense impact is negative 51.1 billion yen, and currency effect is forecast at positive 26.0 billion yen. Pre-tax profit is forecast at 515.4 billion yen higher, considering the decline of 42.4 billion yen in equity in earnings of affiliates due to decline in automobile unit sales in China and gains of 138.6 billion from higher interest received. Next, I will explain the contributing factors in comparison with the previous forecast. Operating profit is forecast at up 200 billion yen compared to the previous forecast. To give you the breakdown, impact from sales is a negative of 69.0 billion yen due to unit sales decline. Impact from selling price and cost is a positive of 129.0 billion yen due to effective pricing in line with enhanced product value and lower prices of precious metals and other raw materials. Impact from expenses is a negative of 163.0 billion yen due to increased warranty expenses. Impact from R&D expenses is a positive of 9.0 billion yen, and currency effect is expected at 294.0 billion yen. For pre-tax profit, our forecast is up 210.0 billion yen, considering the decline in equity in earnings of affiliates of 110.0 billion yen due to decline in automobile unit sales in China and increase of 120.0 billion yen from higher interest received. Lastly, the forecast for capital expenditures, depreciation and amortization and R&D expenditures for fiscal year 24 is as shown. This completes my explanation. Thank you very much for your attention.