Honda Motor Company, Ltd. (HMC)

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Honda Motor (HMC)

Q1 2014 Earnings Call

July 31, 2013 12:00 am ET

Presentation

Unknown Executive

Welcome to the Honda Financial Results Audio Presentation. On July 31, 2013, Honda Motor Company announced its financial results for the fiscal first quarter, which ended on June 30, 2013. Through this audio presentation, we would like to review the financial results and highlight the major factors which influenced Honda's business operations during the period.

The presentation material, which will serve as the basis for today's program, is available on Honda's Investor Relations website at http://world.honda.com/investors. For those of you who have not yet downloaded the material, please do so now, as we will start immediately following the forward-looking statement.

Forward-looking statement. This audio presentation contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on management’s assumptions and beliefs, taking into account information which is currently available.

Therefore, please be advised that Honda’s actual results could differ materially from those described in these forward-looking statements as a result of numerous factors, including general economic conditions in Honda’s principal markets and foreign exchange rates between the Japanese yen and U.S. dollar, the euro and other major currencies, as well as other factors detailed from time to time. The various factors for increases and decreases in income have been classified in accordance with the method that Honda considers reasonable.

Financial summary. We would now like to review the financial summary for the fiscal first quarter, which ended on June 30. Please refer to Slide 3. Operating income for the first quarter was JPY 184.9 billion, a 5.1% increase compared to the same period last year. A number of factors, including a decrease in sales volume and model mix, had a negative impact on earnings, but currency effects due to weaker yen helped to boost earnings.

With respect to motorcycle group unit sales, sales declined in Brazil within the Other Regions category. A number of factors, including the positive impact of new model introductions, led to a rise in Asia, resulting in a total of 4,054,000 units or a 3.7% increase.

Within Automobile operations, unit sales rose in all regions, except for Japan, where the end to an Eco Incentive program led to a decline. The unit sales total for the quarter was 999,000 units, unchanged from a year earlier.

In Power Product operations, robust lawnmower sales led to higher sales in North America, but sales declined in Asia, resulting in unit sales of 1,589,000, a decrease of 2.2%.

Financial highlights for the first quarter. Net sales and other operating revenue totaled JPY 2,834,000,000,000, a 16.3% increase. This was primarily due to a rise in net sales due to the positive impact of foreign exchange fluctuations. Operating income rose to JPY 184.9 billion, a 5.1% increase, mostly due to the positive impact of a weaker yen, as well as cost reductions.

Income before income taxes totaled JPY 172 billion. Equity in income of affiliates amounted to JPY 31.7 billion. Net income attributable to Honda Motor was JPY 122.4 billion. EPS totaled JPY 67.97.

ForEx for the quarter was JPY 99 to the dollar, JPY 19 lower than the year earlier. The euro rate was JPY 129 to the euro, JPY 25 lower compared to the same period last year.

Please turn to the next slide. Financial forecast for fiscal year '14. With respect to our financial forecast for the current fiscal year, the numbers are unchanged from our previous announcement. The ForEx assumption for the second quarter is JPY 95 to the dollar and EUR 125 to the dollar. The ForEx assumption for the fiscal year is JPY 96 to the dollar and EUR 126 to the dollar.

Please turn to Slide 5 for information on the dividend. The annual dividend for fiscal year 2014 is expected to be JPY 80 per common stock, a JPY 4 increase per stock compared to a year earlier. This is unchanged from our April 26 announcement.

The first quarter dividend is expected to be JPY 20 per common stock, a JPY 1 increase compared to the same period last year.

Operating income analysis. Next we would like to discuss the results for the fiscal first quarter, which ended on June 30. Please turn to Slide 7. A positive impact from ForEx fluctuations led to net sales and other operating revenue of JPY 2,834,000,000,000, an increase of 16.3%. Excluding the impact of ForEx fluctuations, details concerning Honda's revenue by business segment for the first quarter are as shown.

Please turn to Slide 8. Next we would like to explain the positive and negative factors which impacted income before income taxes for the quarter. Income before income taxes was JPY 172 billion, a decrease of JPY 22.7 billion compared to the same period last year. Operating income amounted to JPY 184.9 billion, an increase of JPY 8.9 billion.

With respect to revenue and model mix, an increase in unit sales was realized in Asia and Other Regions, while unit sales declined in Japan. A change in model mix in Japan and North America, as well as other factors, led to a negative impact of JPY 46.7 billion.

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