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Honda Motor Reports Consolidated Financial Results for the Fiscal Third Quarter and Nine Months Ended December 31, 2006


January 2007
 Filed under: HONDA CORPORATE Car News | HONDA CORPORATE Headlines
TOKYO, Jan. 31 /PRNewswire-FirstCall/ -- Honda Motor Co., Ltd. (NYSE:HMC) today announced its consolidated financial results for Honda's fiscal third quarter and the fiscal nine months ended December 31, 2006.
Third Quarter Results

Honda's consolidated net income for the fiscal third quarter ended December 31, 2006 totaled JPY 144.8 billion (USD 1,216 million), an increase of 8.8% from the corresponding period in 2005. Basic net income per Common share for the quarter amounted to JPY 79.45 (USD 0.67), an increase of 9.7% compared to JPY 72.41 for the corresponding period in 2005. One of Honda's American Depository Shares represents one Common Share.

Consolidated net sales and other operating revenue (herein referred to as "revenue") for the quarter amounted to JPY 2,768.6 billion (USD 23,244 million), an increase of 12.0% from the corresponding period in 2005. This increase was due mainly to the increased revenue in automobile business in North America and Europe. 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 9.6%.

Consolidated operating income for the quarter totaled JPY 205.1 billion (USD 1,722 million), an increase of 5.2% compared to the corresponding period in 2005. This increase in operating income was primarily due to the positive impact of the increased profit attributable to higher revenue in automobile, power product and financial services business segments and higher revenue in all regions, the effect of newly consolidated subsidiaries, the decreased amount of unrealized profit in inventories, continuing cost reduction effects and the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix, the increased sales incentives in North America, the soaring raw material costs, the increased SG&A expenses mainly because of quality-related expenses, freight and storage costs due to the increase in sales, and the increased R&D expenses.

Consolidated income before income taxes and equity in income of affiliates for the quarter totaled JPY 191.5 billion (USD 1,608 million), an increase of 15.3% from the corresponding period in 2005. This increase was primarily due to the difference between transaction rates and average rates and proceeds from sales of securities.

Equity in income of affiliates amounted to JPY 25.8 billion (USD 217 million) for the quarter, a decrease of 13.0% from the corresponding period in 2005, due mainly to the decline in automobile business in China.

Business Segment

With respect to Honda's sales for the fiscal third quarter by business segment, unit sales of motorcycles totaled 2,765 thousand units, a decrease of 0.8% from the corresponding period in 2005. Unit sales in Japan was 71 thousand units, a decrease of 6.6%. Overseas unit sales was 2,694 thousand units, a decrease of 0.7%, due mainly to the decrease in unit sales of ATVs and kids motorcycles in North America offsetting the positive impact of the increased unit sales in other regions, especially in Latin America. Revenue from unaffiliated customers increased 7.0%, to JPY 303.2 billion (USD 2,546 million) from the corresponding period in 2005, due mainly to the positive impact of the currency translation effects, offsetting the negative impact of the decrease in unit sales. Operating income decreased by 17.0% to JPY 11.1 billion (USD 94 million) from the corresponding period in 2005, due mainly to the increased SG&A expenses and the increased R&D expenses offsetting the positive impact of the currency effects caused by the depreciation of the Japanese yen.

Honda's unit sales of automobiles was 915 thousand units, increased by 12.1% from the corresponding period in 2005. In Japan, unit sales was 156 thousand units, which was approximately the same level as the corresponding period in 2005. Overseas unit sales increased 15.0% to 759 thousand units, due to the increased unit sales in North America, Europe, Asia and other regions. This increase of unit sales was attributable to good sales of, for example, the Accord and the CR-V in North America, and to 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 12.3% to JPY 2,263.8 billion (USD 19,007 million) from the corresponding period in 2005, due to the increased unit sales and the positive impact of the currency translation effects. Operating income increased 6.4% to JPY 160.7 billion (USD 1,350 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, continuing cost reduction effects and the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix, the increased sales incentives in North America, the soaring raw material costs, the increased SG&A expenses and the increased R&D expenses.

Revenue from unaffiliated customers in financial services business increased 29.9% to JPY 104.2 billion (USD 875 million) from the corresponding period in 2005, due to the increased sales attributable to the increase of finance subsidiaries-receivables from the growth of automobile business in North America and the positive impact of the currency translation effects. Operating income increased 3.3% to JPY 22.7 billion (USD 191 million) from the corresponding period in 2005, due primarily to the increased sales, which were attributable to the increase of finance subsidiaries-receivables from the growth of business, and to the currency effects caused by the depreciation of the Japanese yen, offsetting the negative impact of the increase in SG&A expenses including the increase of losses on lease residual values.

Honda's unit sales of power products was 1,382 thousand units, up by 21.9% from the corresponding period in 2005, due mainly to the increased unit sales of general purpose engines in the U.S. and China and in Japan. In Japan, unit sales totaled 124 thousand units, an increase of 12.7%. Overseas unit sales was 1,258 thousand units, an increase of 22.9%, due mainly to the positive impact of the increased unit sales in North America, Europe, Asia and other regions. Revenue from unaffiliated customers in power product and other businesses increased by 5.3% to JPY 97.2 billion (USD 817 million) from the corresponding period in 2005, due mainly to the increased unit sales of power products and the positive impact of the currency translation effects. Operating income increased 23.5% to JPY 10.4 billion (USD 88 million) from the corresponding period in 2005. This was primarily due 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 third quarter by geographical segment, in Japan, revenue for domestic and exports sales was JPY 1,223.8 billion (USD 10,275 million), up by 9.4% compared to the corresponding period in 2005, due primarily to the increased revenue from exports in automobile business and the currency effects caused by the depreciation of the Japanese yen. Operating income was JPY 41.9 billion (USD 352 million), down by 44.8% from the corresponding period in 2005, due primarily to the negative impact of the change in model mix, the soaring raw material costs, the increased SG&A expenses and the increased R&D expenses, which offset the positive impact of the increased profit attributable to higher revenue, continuing cost reduction effects and the currency effects caused by the depreciation of the Japanese yen.

In North America, revenue increased by 9.0% to JPY 1,612.1 billion (USD 13,535 million) from the corresponding period in 2005, due mainly to the increased unit sales in automobile and power product businesses and the positive impact of the currency translation effects. Operating income increased by 10.7% to JPY 118.2 billion (USD 992 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, continuing cost reduction effects 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, the increased sales incentives and the increased SG&A expenses.

In Europe, revenue was JPY 271.6 billion (USD 2,281 million), which was approximately the same level as the corresponding period in 2005, due primarily to the increased unit sales in automobile and power product businesses and the positive impact of the currency translation effects which offset the negative impact of the change in model mix. Operating income increased by 31.6% to JPY 3.7 billion (USD 32 million) from the corresponding period in 2005, due primarily to the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix and the increased SG&A expenses.

In Asia, revenue increased by 22.0% to JPY 303.4 billion (USD 2,548 million) from the corresponding period in 2005, due primarily to the increased unit sales in automobile and power product businesses and the positive impact of the currency translation effects. Operating income increased by 17.6% to JPY 20.2 billion (USD 170 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. Accounting terms of some of the affiliates differ from the Company's. 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 31.7% to JPY 193.0 billion (USD 1,621 million) compared to the corresponding period in 2005, due mainly to the increased unit sales in all of the business segments and the positive impact of the currency translation effects. Operating income decreased by 3.8% to JPY 16.0 billion (USD 135 million) from the corresponding period in 2005, due mainly to the negative impact of the increased SG&A expenses, offsetting the positive impact of the increased profit attributable to higher revenue and the currency effects caused by the depreciation of the Japanese yen.

Nine Months Results

Honda's consolidated net income for the fiscal nine months ended December 31, 2006 totaled JPY 416.1 billion (USD 3,494 million), an increase of 10.2% from the corresponding period in 2005. Basic net income per Common share for the period amounted to JPY 227.96 (USD 1.91), compared to JPY 204.71 for the corresponding period in 2005. One of Honda's American Depository Shares represents one Common Share.

Consolidated revenue for the period amounted to JPY 7,999.2 billion (USD 67,159 million), an increase of 13.1% from the corresponding period in 2005. Honda estimates that if the exchange rate of the Japanese yen had remained unchanged from the corresponding period in 2005, revenue for the period would have increased by approximately 8.2%.

Consolidated operating income for the period totaled JPY 601.6 billion (USD 5,051 million), an increase of 13.9% compared to the corresponding period in 2005. This increase in operating income was primarily due to the positive impact of the increased profit attributable to higher revenue in all business segments and higher revenue in all regions in overseas, the change in sales price in North America, the effect of newly consolidated subsidiaries, the decreased sales promotion expenses, continuing cost reduction effects and the currency effects caused by the depreciation of the Japanese yen, which offset the negative impact of the change in model mix, the increased sales incentives in North America, the soaring raw material costs, the increased SG&A expenses including the increase in quality-related expenses, storage costs and selling expenses due to the increase in sales, and freight costs due to higher oil price, the increased advertising expenses and the increased R&D expenses.

Consolidated income before income taxes and equity in income of affiliates for the period totaled JPY 537.4 billion (USD 4,512 million), an increase of 12.0% from the corresponding period in 2005, mainly due to the difference between transaction rates and average rates, income in interest due to the increase in interest rates and proceeds from sales of securities.

Equity in income of affiliates amounted to JPY 83.4 billion (USD 701 million) for the period, an increase of 8.6% from the corresponding period in 2005.

Forecasts for the Fiscal Year Ending March 31, 2007

In regard to the forecasts of the financial results for the fiscal year ending March 31, 2007, Honda projects consolidated and unconsolidated results to be as shown below:

FY2007 Forecasts for Consolidated Results
Fiscal year ending March 31, 2007
Changes from
Yen (billions) FY 2006
Net sales and other operating revenue 11,100 + 12.0%
Operating income 820 - 5.6%
Income before income taxes and equity
in income of affiliates 755 - 7.3%
Net income 560 - 6.2%
Basic net income per Common share 307.33 --

FY2007 Forecasts for Unconsolidated Results
Fiscal year ending March 31, 2007
Changes from
Yen (billions) FY 2006
Net sales 4,010 + 6.7%
Operating income 190 - 20.8%
Ordinary income 308 - 4.3%
Net income 262 - 13.2%

These forecasts are based on the assumption that the average exchange rates for the Japanese yen to the U.S. dollar and the Euro for the fiscal fourth quarter ending March 31, 2007 will be JPY 118 and JPY 153 and for the full year ending March 31, 2007, JPY 117 and JPY 149, respectively.

Dividend per Share of Common Stock

During the year ending March 31, 2007, the Company's Board of Directors resolved on January 31, 2007 to make a distribution of surplus to the stockholders of record on December 31, 2006, at JPY 17 per share of common stock. It also intends to distribute year-end cash dividends of JPY 17 per share of the record date on March 31, 2007, respectively. As a result, total cash dividends for the year ending March 31, 2007, together with the interim cash dividends of JPY 30, are planned to be JPY 64 per share. The Company did a two-for-one stock split for the Company's common stock effective July 1, 2006. Had the stock split not been carried out, annual dividends would have corresponded to JPY 128, an increase of JPY 28 per share from the annual dividends paid for fiscal 2006.

More information for Honda's consolidated financial results can be found at Honda's Investor Relations website http://world.honda.com/investors/financialresult/

This announcement 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 currently available to it. Therefore, please be advised that Honda's actual results could materially differ 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.

Source: Honda Motor Co., Ltd.

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