Honda Motor Co., Ltd. Reports Consolidated Financial Results for the Fiscal First Quarter Ended June 30, 2006
TOKYO, July 26 -- Honda Motor Co., Ltd. today announced its consolidated financial results for the fiscal first quarter ended June 30, 2006.
First Quarter Results
Honda's consolidated net income for the fiscal first quarter ended June 30, 2006 totaled JPY 143.4 billion (USD 1,244 million), an increase of 29.6% from the corresponding period in 2005. Basic net income per Common share for the quarter amounted to JPY 78.46 (USD 0.68), compared to JPY 59.87 for the corresponding period in 2005. One of Honda's American Depository Shares represents one Common Share.
The Company did a two-for-one stock split for the Company's common stock effective July 1, 2006. Concurrently, Honda's common stock-to-ADR exchange ratio was changed from one share of common stock to two ADRs, to one share of common stock to one ADR. Basic net income per common share and ADR were calculated based on the number of common shares after the stock split.
Consolidated net sales and other operating revenue (herein referred to as "revenue") for the quarter amounted to JPY 2,599.7 billion (USD 22,559 million), an increase of 14.8% from the corresponding period in 2005. Revenue was mainly increased in automobile business in North America and Latin America. Honda estimates that if the exchange rate of the Japanese yen had remained unchanged from the corresponding period in 2005, revenue for the quarter would have increased by approximately 7.8%.
Consolidated operating income for the quarter totaled JPY 203.5 billion (USD 1,766 million), an increase of 19.4% compared to the corresponding period in 2005. This increase in operating income was primarily due to the positive impact of increased profit attributable to higher revenue, decreased research and development (R&D) expenses and currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix, the soaring raw material costs and increased selling, general and administrative (SG&A) expenses.
Consolidated income before income taxes and equity in income of affiliates for the quarter totaled JPY 186.9 billion (USD 1,623 million), an increase of 29.6% from the corresponding period in 2005.
Equity in income of affiliates, which is mainly attributable to increased sales in automobile business in China, amounted to JPY 30.1 billion (USD 262 million) for the quarter, an increase of 42.8% from the corresponding period in 2005.
Business Segment
With respect to Honda's sales for the fiscal first quarter by business segment, unit sales of motorcycles totaled 2,380 thousand units, a decrease of 7.8% from the corresponding period in 2005. Unit sales in Japan was 89 thousand units, a decrease of 6.3%. Overseas unit sales was 2,291 thousand units, a decrease of 7.8%*, due mainly to a decrease in unit sales of parts for local production at Honda's affiliates accounted for under the equity method in Indonesia which was caused by a decline in the market environment due mainly to a rise of interest rate, offsetting healthy unit sales in Latin America. Revenue from unaffiliated customers increased 17.8%, to JPY 310.1 billion (USD 2,691 million) from the corresponding period in 2005, due mainly to the positive impacts of the currency translation effects and the change in model mix, offsetting the negative impact of decreased unit sales. Operating income increased by 27.4% to JPY 13.1 billion (USD 114 million) from the corresponding period in 2005, due mainly to the positive impacts of the increased profits attributable to higher revenue, the change in sales price in Latin America and the currency effects caused by the depreciation of the Japanese yen, offsetting the negative impact of the increased SG&A expenses.
* Of the net sales of Honda-brand motorcycle products that are manufactured and sold by overseas affiliates accounted for under the equity method, those with respect to which parts for manufacturing were not supplied from Honda or such subsidiaries are not included in net sales and other operating revenue, in conformity with U.S. generally accepted accounting principles. Accordingly, these unit sales are not included in the financial results and forecasts. Such products amounted to approximately 500 thousand units for the quarter.
Honda's unit sales of automobiles was 896 thousand units, increased by 6.7% from the corresponding period in 2005. In Japan, unit sales decreased 6.6% to 156 thousand units. Overseas unit sales increased 10.0% to 740 thousand units, due mainly to the increased unit sales in North America attributable to good sales of, for example, the Civic and the Fit and the increase in unit sales of parts for local production at Honda's affiliates accounted for under the equity method in China. Revenue from unaffiliated customers increased 13.5% to JPY 2,095.6 billion (USD 18,185 million) from the corresponding period in 2005, due to the positive impacts of the currency translation effects and the increased unit sales. Operating income increased 12.7% to JPY 150.0 billion (USD 1,302 million) from the corresponding period in 2005, due mainly to the positive impact of the increased profit attributable to higher revenue, the change in sales price in North America, the decreased R&D expenses and the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix, the soaring raw material costs and the increased SG&A expenses.
Revenue from unaffiliated customers in financial services business increased 30.9% to JPY 89.9 billion (USD 781 million) from the corresponding period in 2005, due mainly to the positive impacts of the currency translation effects and the growth of automobile business in North America. Operating income increased 47.4% to JPY 29.2 billion (USD 254 million) from the corresponding period in 2005, due mainly to the positive impact of the decreased SG&A expenses due to the reversal of the allowance for losses on lease residual values and credit losses, which was attributable to the increase in used-car prices, the increased profit attributable to higher revenue due to the increased finance subsidiaries-receivables from growth of business and the currency effects caused by the depreciation of the Japanese yen, which offset negative impact of increased funding costs.
Honda's unit sales of power products was 1,724 thousand units, up by 16.3% from the corresponding period in 2005. In Japan, unit sales totaled 137 thousand units, an increase of 13.2%. Overseas unit sales was 1,587 thousand units, an increased of 16.6%, due mainly to the positive impact of increased unit sales of general-purpose engines in North America and Europe. Revenue from unaffiliated customers in power product and other businesses increased by 20.0% to JPY 103.9 billion (USD 902 million) from the corresponding period in 2005, due mainly to the positive impacts of the currency translation effects and the increased unit sales of power products. Operating income was JPY 11.0 billion (USD 96 million), an increase of 56.9% from the corresponding period in 2005, due mainly to the positive impact of the increased profit attributable to higher revenue and the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the increased SG&A expenses.
Geographical Segment
With respect to Honda's sales for the fiscal first quarter by geographical segment, in Japan, revenue for domestic and exports sales was JPY 1,109.2 billion (USD 9,626 million), up by 4.6% compared to the corresponding period in 2005, due primarily to the positive impact of the increased revenue from exports in automobile business, which offset the negative impact of the decreased unit sales in domestic automobile business. Operating income was JPY 48.9 billion (USD 425 million) from the corresponding period in 2005, up by 3.7%, due primarily to the positive impact of the increased profit attributable to higher revenue, the decreased R&D expenses and the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix, the soaring raw material costs and the increased SG&A expenses.
In North America, revenue increased by 17.6% to JPY 1,467.9 billion (USD 12,738 million) from the corresponding period in 2005, due mainly to the positive impact of the increased revenue in all of Honda's business segments, particularly motorcycle, automobile, financial services, and power product and other business, and the currency translation effects. Operating income increased by 57.4% to JPY 114.4 billion (USD 993 million) from the corresponding period in 2005, due primarily to the positive impact of the increased profit attributable to higher revenue, the change in sales price in automobile business, the decreased SG&A expenses and the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix, the soaring raw material costs and the increased sales incentives.
In Europe, revenue increased by 9.3% to JPY 325.1 billion (USD 2,821 million) compared to the corresponding period in 2005, due primarily to the positive impact of the increased revenue in automobile business and the currency translation effects. Operating income decreased by 49.5% to JPY 6.4 billion (USD 56 million) from the corresponding period in 2005, due mainly to the negative impact of the change in model mix and the increased SG&A expenses, which offset the positive impact of the currency effects caused by the depreciation of the Japanese yen.
In Asia, revenue increased by 24.2% to JPY 287.5 billion (USD 2,495 million) from the corresponding period in 2005, due primarily to the positive impacts of the increased revenue in automobile business and the currency translation effects. Operating income increased by 1.4% to JPY 19.4 billion (USD 169 million) from the corresponding period in 2005, due mainly to the positive impact of the increased profit attributable to higher revenue and the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the increased SG&A expenses.
In Asia, in addition to subsidiaries, many affiliates accounted for under the equity method manufacture and sell Honda-brand products. Operating income does not include income from these affiliates. Income from these affiliates is recorded as equity in income of affiliates and reflected in net income.
In other regions, revenue increased by 51.3% to JPY 176.9 billion (USD 1,535 million) compared to the corresponding period in 2005, due mainly to the positive impact of the increased revenue in all of Honda's business segments and the currency translation effects. Operating income increased by 11.6% to JPY 15.2 billion (USD 132 million) from the corresponding period in 2005, due mainly to the positive impact of the increased profit attributable to higher revenue and currency effects caused by the depreciation of the Japanese yen, offsetting the negative impact of the increased SG&A expenses.
Forecasts for the Fiscal Year Ending March 31, 2007
FY2007 Forecasts for Consolidated Results
First half ending September 30, 2006
Yen (billions) Changes from FY 2006
Net sales and other
operating revenue 5,270 +14.5%
Operating income 370 +11.1%
Income before income taxes and
equity in income of affiliates 360 +14.8%
Net income 275 +12.5%
Fiscal year ending March 31, 2007
Yen (billions) Changes from FY 2006
Net sales and other
operating revenue 10,700 +8.0%
Operating income 750 -13.7%
Income before income taxes and
equity in income of affiliates 735 -9.8%
Net income 550 -7.9%
Basic net income per Common share 300.97 -
More information can be found at http://world.honda.com/investors/financialresult/
