Honda Motor Company, Ltd. (HMC)

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Honda Motor Co Ltd (HMC)

Q1 2013 Earnings Call

July 31, 2012 12:00 pm ET

Executives

Analysts

Presentation

Operator

Unidentified Company Representative

Welcome to the Honda Financial Results Audio Presentation. On July 31, 2012, Honda Motor Company announced its financial results for the fiscal first quarter, which ended on June 30, 2012. 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 our 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 the 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 a method that Honda considers reasonable.

Before explaining the results, we would like to briefly review the global economic environment during the past quarter. The U.S. market showed continued signs of a gradual recovery. However, the unemployment rate has remained at a high level and housing investments have been sluggish.

The European sovereign debt crisis continues to be a major cause of concern. The European market has slowed down to a standstill. Serious concern over the future of financial markets has negatively impacted capital investments and its continued high unemployment rates in the region. There is a high risk of protracted stagnation in the regional economy.

Asia's business environment has been influenced by weaker growth in China and India, which in turn has negatively impacted the economies in the surrounding countries in the region. Weariness over the European debt crisis, along with further tightening in financial markets, is expected to lead to much more gradual growth in the near future.

Japan's bleak economic situation continues, but a slight upturn was realized during the quarter. Looking ahead, significant risks exist due to the influence of the European debt crisis, tightening of global financial markets, fluctuations in financial exchange rates, as well as subsequent swings in stock prices. From a market segment standpoint, the automobile industry in the U.S. rebounded from the sales slowdown in the same period last year, which resulted from the supply constrains following the earthquake. Eco car incentives in Japan and Russia led to market growth, while India also experienced an increase in market demand. Conversely, sales in Brazil were relatively flat and the market contracted in Europe.

In the Motorcycle segment, demand was exceptionally strong in India and market growth was also realized in Thailand. Due to the introduction of stricter consumer credit regulations regarding down payment requirements, sales volume contracted in Indonesia. The sluggish global economic environment also led to sharp drops in Vietnam and Brazil.

Financial summary, we would now like to review the financial summary for the first quarter, which ended on June 30, 2012.

Please refer to slide four. Honda realized a major recovery in automobile production and sales, predominantly in North America and Japan. High motorcycle sales for the quarter and a contribution from stable financial services operations led to higher revenue and operating income, compared to the same period last year. With respect to group unit sales, a sharp increase in several Asian motorcycle markets led to a total of 3,911,000 units, up 12.5% compared to the same period last year.

Regarding the Automobile segment, both, North America and Japan rebounded strongly from last year's disaster. And in Asia, Thailand also posted increased sales. These gains led to a total of 999,000 units, an increase of 59.8% compared to the first quarter of last year.

Power product unit sales declined in Europe and Japan, but a sharp increase in North America, as well as a gain in Asia, resulted in a total of 1,625,000 units, up 7.5% from the same period the previous year.

Financial highlights for the first quarter. Revenue totaled ¥2,435.9 billion, a rise of 42.1%. Operating income amounted to ¥176.0 billion, an increase of ¥153.5 billion or 679.5%, compared to the same period last year. This was mainly due to increased revenue from motorcycle and automobile operations despite an increase in R&D costs and the negative impact of currency fluctuations.

Income before taxes totaled ¥194.7 billion. Equity in income of affiliates totaled ¥20.7 billion, a decrease of 27.6% from the same period last year. Net income attributable to Honda Motor totaled ¥131.7 billion, an increase of 314.3% compared to the same period last year. EPS was ¥55.45, which represents a ¥37.8 increase from the same period last year. With respect to ForEx during the period, the Japanese yen appreciated against the U.S. dollar and the euro. The average yen exchange rate was ¥80 to the U.S. dollar, ¥2 higher than the same period last year. The euro average was ¥104 per euro, ¥14 higher than the same period last year.

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