Honda Motor Company, Ltd. (HMC)

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Honda Motor Co., Ltd. (HMC)

F2Q13 Earnings Call

October 29, 2012 12:00 am ET

Executives

Fumihiko Ike – Chief Financial Officer, Senior Managing Officer and Director

Kohei Takeuchi – Operating Officer, General Manager of Accounting Division

Presentation

Unidentified Company Representative

Welcome to the Honda Financial Results Audio Presentation. On October 29, 2012, Honda Motor Company announced its Financial Results for the Fiscal Second Quarter, which ended on September 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.

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 business environment during the past quarter. The automobile industry in the U.S. continued a steady recovery from the sales slowdown in the same period last year, which resulted from supply constraints following the earthquake.

Eco car incentives boosted sales in Japan while Europe was down sharply despite robust growth in Russia. Sales in Asia were led by a strong rebound in Thailand while sales in China continued to rise, but at a more moderate pace.

In the Motorcycle segment, sales rose in Asia led by increasing demand for scooters in India. Due to the introduction of stricter consumer credit regulations related to down payment requirements, sales volume contracted in Indonesia. Demand was down sharply in Brazil and to a lesser extent in Vietnam where the market is beginning to show signs of a gradual recovery.

We would now like to review the financial summary for the second quarter, which ended on September 30, 2012. Please refer to slide 4. Honda realized a major recovery in automobile production and sales, predominantly in North America, Japan, and Asia. In conjunction with slight growth in motorcycle sales and stable Financial Services operations for the quarter, consolidated revenue and operating income rose sharply compared to the same period last year.

With respect to Group unit sales, a large increase in several Asian motorcycle markets was largely offset by a decline in the Other Regions markets leading to a total of 3,879,000 units, up 1.8% compared to the same period last year.

Regarding the Automobile segment, unit sales rose in every region. These gains led to a Group sales total of 996,000 units, an increase of 46.9% compared to the second quarter of last year. Power Product operations recorded strong unit sales in Asia, as well as a gain in Other Regions markets, resulting in a slight rise to 1,288,000 units, up 0.9% from the same period the previous year.

Revenue totaled 2,271.2 billion yen, a rise of 20.4%. Operating income amounted to 100.8 billion yen, an increase of 48.3 billion yen or a rise of 92.1% compared to the same period last year. This was mainly due to increased revenue from Automobile operations and cost down efforts, despite an increase in SG&A and R&D expenses, as well as the negative impact of currency fluctuation.

Income before taxes totaled 106.2 billion yen. Equity in income of affiliates totaled 27.4 billion yen, an increase of 76.7% from the same period last year. Net income attributable to Honda Motor totaled 82.2 billion yen, an increase of 36.1% compared to the same period last year. EPS was 45.63 yen, which represents a 12.10 yen increase from the same period last year.

With respect to Forex during the period, the Japanese yen depreciated against the U.S. dollar and appreciated against the euro. The average yen exchange rate was 79 yen to the U.S. dollar, 1 yen lower than the same period last year. The euro average was 98 yen per euro, 11 yen higher than the same period last year.

Next, we would like to provide you with more details related to our fiscal results. Please turn to slide 10. Due predominately to a sharp increase in Automobile operating revenues, as well as the rise in Financial Services business operations, our total revenue reached 2,271.2 billion yen, despite the negative impact of currency fluctuation of 70.9 billion yen. In the chart adjacent to the graph, details of the fiscal quarter by business segment are highlighted.

Please refer to the next slide. I will now summarize our income before income taxes for the fiscal second quarter. Income before income taxes amounted to 106.2 billion yen as shown in the bar on the right side of the graph. This represents an increase of 29.7 billion yen compared to the same period last year. Operating income for the second quarter shown at the bottom right totaled 100.8 billion yen, an increase of 48.3 billion yen, compared to the operating income of 52.5 billion yen in the same period last year, as shown in the bottom left corner.

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