Honda Motor Company, Ltd.

I 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 third quarter of fiscal year to March 26. First of all, allow me to introduce the attendees today. Mr. Noriya Karihara, Director, Executive Vice President, and Representative Executive Officer. Good to see you, everyone. We have Mr. Eiji Fujimura, Director, Managing Executive Officer. Thank you. And Mr. Masao Kawaguchi, Operating Executive, Head of Accounting and Finance Unit. This is Kawaguchi. Good to see you, everyone. Mr. Kaihara will first present the financial results of third quarter ended December of 25 and forecast of consolidated results for the fiscal year ending in March 26. Then Mr. Fujimura will present the details. Over to you, Mr. Kaihara. Thank you. I thank you very much for your continued support for Hondo's activities. I would like to present to you the financial results for the third quarter of fiscal year to March 2026. I would like to start with the highlights of the financial results. Our operating profit for the third quarter of the year to March 2026 was 591.5 billion yen. Motorcycle operations saw solid global unit sales led by India and Brazil. And in addition, the restriction on ICE vehicles in Vietnam, which was a concern, had only limited impact to sales compared to our assumption. For results up to third quarter, we've attained the record high unit sales, operating profit and operating margin. Automobile operations saw declines in profit due to non-recurring expenses related to EV in addition to impact from tariffs. Operating cash flow after R&D adjustment, which indicates the resource available for future investments, came to 1,855.8 billion yen. generating cash on a par with same period last year. The forecast for the consolidated results for the term ending in March 26 is operating profit of 550 billion yen and profit for the year of 300 billion yen unchanged from the previous forecast. Impact from tariffs were initially forecast at 450 billion yen at the beginning of the term, but our prospects are now that it would be reduced to 310 billion yen. Toward the end of the term, though we expect growth in profit due to yen depreciation, the competitive environment for automobiles in Asia will intensify, requiring incentives. Taking into consideration uncertain business environment, we are maintaining the previous forecast. Going by business segments, for motorcycle operations, with the tailwind of solid sales in India and Brazil, we continue to aim for 21.3 million units, the highest record sales. For automobiles, we will maintain the forecast of 3.34 million units unchanged from last forecast. The shortage of semiconductor supply experience in third quarter now has good prospects for preventing recurrence. On the other hand, we are beginning to see signs of supply risk for other materials such as rare earth metals and memories, and we will closely monitor the situation and take actions as needed. To give you the consolidated results for the third quarter of the year to March 26, operating profit was 591 billion yen, lower by 548.4 billion compared to the same period last year. Investment earnings due to equity method was 24.0 billion yen, higher by 51.3 billion. And the quarter profit attributable to the owner of the parent was 465.4 billion yen, lower by 339.8 billion yen. Next, I'd like to cover the forecast for the consolidated results for the term ending March 26. Compared to the previous forecast, we maintain our forecast of operating profit of 550 billion, and then the profit of the year attributable to the owner of the parent of 300 billion yen, which is unchanged. The exchange rate against the U.S. dollar is assumed at 140 yen for the full year period. Next, for shareholder returns, forecast for the full-year dividend for the first career ending March 26 is 70 yen per share, unchanged from the previously published forecast. In addition, the Board of Directors meeting held today has resolved on cancellation of Treasury stocks. We will execute cancellation of 747 million Treasury stocks.

So, let me explain about the details of the financial performance, and Mr. Fujimura is going to explain. Let me start. So, regarding cumulative group unit sales for three months up to the third quarter year on year for motorcycles, 16.44 million units sold due to the increase in India, Pakistan, and Brazil. For automobiles, 2.561 million units due to decline in Asia, mainly in China. And for power products and business, 2.507 million units sold due to some incremental sales in Europe and decline mainly in Asia. We have explained the consolidated performance up to the third quarter already. Next, I will explain factors for changes of operating profit year on year. Operating profit was 591.5 billion yen, down by 548.4 billion yen year on year. Factors behind for changes? Sales made a positive impact. by 38.1 billion because of the increase in motorcycle unit sales, as well as in profit in financial businesses, though automobile unit sales declined due to the shortage of semiconductor supplies. Price and cost impact were positive by 225.9 billion due to effective price revisions. Expenses impact was negative on profit by 108.6 billion, R&D impact negative by 35.7 billion, foreign currency impact negative by 111 billion, one-time EV-related expenses impact negative by 267.1 billion, and tariff impact squeezed the profit by 289.8 billion yen. Excluding one-time EV-related expenses and the tariff impact, the operating profit will be 148.5 billion yen. Regarding operating profit by business segments, motorcycle businesses, 446.5 billion yen operating profit, automobile businesses, 166.4 billion yen losses, financial services businesses 218 billion yen profit, and the products and other businesses 6.5 billion yen losses. Operating profit of motorcycle business increased by 44.8 billion yen year-on-year due to market for 546.5 billion yen factors for changes. Sales impact was positive to add 61.2 billion yen due to incremental sales units mainly in Asia and South America. Price-cost impacts were positive by 48.6 billion due to effective price revisions and so on. Expenses impact negative by 24.1 billion, R&D impact was positive by 4.6 billion yen, foreign currency impact negative by 37.7 billion yen, and tariff impact negative by 7.7 billion yen. Operating profit of automobile business went down by 569 billion year-on-year, resulting in the operating losses of 166.4 billion yen. Breakdown of factors for changes. Sales had a negative impact by 82.8 billion yen due to unit sales decline, mainly due to semiconductor supply shortage, losses associated with the reorganizing of the affiliated company, of the group, and so on. Price and cost impact had a positive impact by 177.3 billion yen due to effective price revisions. Expenses had a negative impact by 11.7 billion. R&D impact negative by 42.1 billion. Foreign currency impact negative by 62.9 billion. One time EV related expenses had a negative impact by 267.1 billion. And the tariff impact was negative by 279.5 billion yen. Cash flow situations now. Free cash flows excluding financial service businesses was 917.4 billion yen. Net cash as of the end of the third quarter was 3 trillion and 170.7 billion yen. And operating cash flows after around the adjustment was 1 trillion and 855.8 billion yen. Let me explain consolidated forecast for FY ending March 2026. Regarding group unit sales, we will keep the previous forecast of 21.3 million units of motorcycles, 3.4 million units for automobiles, and 3.67 million units for power products volume. And we have already explained the consolidated financial forecast for FYE March 2026. As for factors for changes in operating profit year-on-year for those forecasts, Operating profit would be down by ¥663.4 billion year on year. With factors for changes, sales would have a negative impact by ¥162 billion due to semiconductor supply shortage and so on. Price-cost impact will be positive by ¥330 billion due to effective price revisions and so on. Expenses impact 106.5 billion yen negative, R&D impact 166 billion yen negative, foreign currency impact 149 billion yen negative, and the tariff impact negative by 310 billion yen. Regarding factors for changes in the forecast of the operating profits, We will keep the previous forecast of the operating profit, for which sales impact will be negative by 10 billion, expenses impact negative by 15 billion, R&D expenses impact negative by 40 billion, and foreign currency will make a positive impact by 65 billion yen due to the change of the exchange rate assumption to 148 yen for a dollar. Expected capital expenditures, depreciation, amortization, and warranty spending for March 2026 will be as follows, a reflecting increase in capex for acquisition of factory buildings and so on of the battery production JV with LG energy solution.

Lastly, I would like to speak about the future direction of our operations in view of the current business environment. For automobiles operations, with the expertise we have accumulated on internal combustion engines and hybrid technologies, our result the third quarter confirmed that we are maintaining business characteristics that continually give us profit if we exclude the non-recurring impact from EV and impact from tariffs. On the other hand, we are faced with issues including stagnated growth of EV market, less stringent environmental regulations in different markets, retreat of multilateral free trade system due to protectionism policies, heightened supply chain risk due to expansion of global procurement, further exacerbated by intensifying global competition from emerging OEMs. Thereby, we need to conduct a fundamental review of our strategies to rebuild our competitive strength. In this situation, we believe that our current tasks are to build lean business characteristics to enable flexible actions against changing business environment and to realize product features and cost competitiveness that overwhelm those of emerging OEMs. To address those issues, firstly, we are working to completely settle within this fiscal year the losses related to EVs currently sold in North America. In addition, we are striving to make prompt management decisions in line with EV markets, such as disciplined expenditure control, EV product range, and review of CAPEX plans aligned with the business environment. At the same time, to further enhance the earning capability of hybrid models, we are preparing to launch next-generation hybrid systems, as well as equipping the hybrid models with next-generation ADAS. We will communicate our review of fundamental medium- to long-term strategy at an appropriate timing sometime during the coming fiscal year. Honda has multiple business domains including motorcycle and finance business operations, forming a well-balanced business portfolio. each of which help us to generate cash flow and to maintain a sound balance sheet. Because of this, we have adopted a DOE indicator, which allows us to ensure stable returns and dividends aligned with the company's growth even in an uncertain and extremely volatile business environment. Through this initiative, we will continue to strive to enhance corporate values so that we will remain a company expected to exist in the eyes of our stakeholders. This completes my presentation. I thank you very much for your attention.