Honda Corporate Update - 218 Summer Acura RDX (North America)
Honda Corporate Update Business Status Business Strategy Automobile Business Operations Motorcycle Business Operations 23 Vision Other Topics Financial Highlights 2
Profit Structure Profile over Past Decade and Forecast 13 12 11 1 9 8 USD/JPY 17 for 7 1,8 PP & Others Finance Motorcycle Automobile O/P Margin Yen (billion) 1,6 US GAAP IFRS 1,4 1,2 1, 8 6 4 2-2 6.4% 4.2% 569 363 Earthquake Thai flood 2.9% 544 231 6.6% 5.5% 5.% 823 461 28 84 833 3.4% 71 153 6.% 5.4% 4.6% 374 51 177 192 182 171 267 183 23 199 178 196 FY21 211 212 213 214 215 216 217 218 219(P) * 212 * Forecast as of July 31, 218 67 Airbag Inflator Issue 53 7% 5% 3% 1% -1% 3
Forecast: Honda Group Unit Sales Unit (thousand) Motorcycles Automobiles Power Products 19,554 2,545 2,85 6,262 6,29 6,345 5,199 5,375 5,285 + 35 ( + 1.5 % ) -9 ( - 1.7 % ) +55 ( +.9 % ) FY18 Results Previous Forecast Revised Forecast FY18 Results Previous Forecast Revised Forecast FY18 Results Previous Forecast Revised Forecast Previous Forecast Revised Forecast Change Previous Forecast Revised Forecast Change Previous Forecast Revised Forecast Change Japan 19 19-69 69-3 3 - North America 325 325-2,15 1,94-75 3,55 3,55 - Europe 235 245 +1 185 175-1 1,3 1,4 +1 Asia 18,545 18,855 +31 2,22 2,22-1,495 1,535 +4 Other Regions 1,25 1,235-15 265 26-5 41 415 +5 Total 2,545 2,85 +35 5,375 5,285-9 6,29 6,345 +55 4
Forecast: Consolidated Unit Sales Unit (thousand) Motorcycles Automobiles Power Products 12,954 13,56 13,775 3,689 3,835 3,745 6,262 6,29 6,345 + 215 ( + 1.6 % ) -9 ( - 2.3 % ) +55 ( +.9 % ) FY18 Results Previous Forecast Revised Forecast FY18 Results Previous Forecast Revised Forecast FY18 Results Previous Forecast Revised Forecast Previous Forecast Revised Forecast Change Previous Forecast Revised Forecast Change Previous Forecast Revised Forecast Change Japan 19 19-62 62-3 3 - North America 325 325-2,15 1,94-75 3,55 3,55 - Europe 235 245 +1 185 175-1 1,3 1,4 +1 Asia 11,56 11,78 +22 75 75-1,495 1,535 +4 Other Regions 1,25 1,235-15 265 26-5 41 415 +5 Total 13,56 13,775 +215 3,835 3,745-9 6,29 6,345 +55 5
Financial Forecast (Consolidated) Yen (billion) FY18 Change Results Forecast amount % Change from previous forecast Sales revenue 15,361.1 15,45. + 88.8 +.6% - 15. Operating profit 833.5 71. - 123.5-14.8% + 1. Operating margin 5.4% 4.6% -.8pt +.1pt Share of profit of investments accounted for using the equity method 247.6 215. - 32.6-13.2% - Profit before income taxes 1,114.9 93. - 184.9-16.6% + 1. Profit for the year attributable to owners of the parent 1,59.3 615. - 444.3-41.9% + 45. Earnings per share attributable to owners of the parent (Yen) * 59.79 348.56-242.23 + 26.14 * Please refer to the footnotes on the last page Market average rates (Yen) U.S. Dollar 111 17 Yen up by 4 yen ( 1H 19 / 2H 15 ) Yen down by 2 yen 6
Forecast: Change in Operating Profit Operating Profit -123.5 ( - 14.8 % ) Yen (billion) 833.5-178. Real-term Currency Effects + 53.7-14.7 694.5 Litigation Settlement *1 *2 Restitution income *2 Excluding real-term currency effects and impact of one-time issues Operating profit + 65.5 ( + 9.4 % ) 76. + 65.5-5. Profit change (excl. real-term currency effects and one-time issues) Impact of Mexico plant flooding (Including decrease of unit sales due to shutdown) 71. Raw material price increase Real-term profit increase - 75. + 14.5 Operating margin 5.4% Operating margin 4.5% Operating margin 4.9% Operating margin 4.6% FY18 Results *1 *2 Weak Argentina peso is expected to cause inflationary impact of (-27.). This amount is deducted from Currency Effects to calculate Real-term currency effects. (Price changes as a result of inflationary impact is included in Cost Reduction, etc. above.) Litigation settlement and restitution income related to airbag inflator in FY18 Forecast 7
Change in the company s shareholders return policy Purpose for the change Further improving the Company s capital strategy Points of the change Acquisition of the Company s own shares at a timing that it deems optimal Goal: to maintain a shareholders return ratio of approximately 3% Goal: to realize a return ratio alone of approximately 3% With respect to the redistribution of profits to its shareholders, the Company s basic policy is to determine such distributions after taking into account, among others, its retained earnings for future growth and consolidated earnings performance based on a long-term perspective. 8
Dividend Dividend per Share (Yen) FY18 (Expectation) Increase / Decrease from FY18 1 st Quarter End 24 27 + 3 2 nd Quarter End 24 (27) (+ 3) 3 rd Quarter End 25 (27) (+ 2) 4 th Quarter End 27 (27) ( - ) Fiscal Year 1 (18) (+ 8) 9
FY11 Actual Recent Shareholders Return Summary Trend FY12 Actual FY13 Actual FY14 Actual FY15 Actual FY16 Actual FY17 Actual FY18 Actual (Expectation) 1 st Quarter End 12 15 19 2 22 22 22 24 27 2 nd Quarter End 12 15 19 2 22 22 22 24 (27) Dividend (Yen) 3 rd Quarter End 15 15 19 2 22 22 24 25 (27) 4 th Quarter End 15 15 19 22 22 22 24 27 (27) Fiscal Year 54 6 76 82 88 88 92 1 (18) Dividend ratio* 18.3% 51.1% 37.3% 25.7% 32.2% 46.% 26.9% 25.1% (3.9%) ** Acquisition of the (billion) 25. 87. 62.1 Company s Own Shares (billion Yen) 3 Acquisition of the Company s Own Shares 18.3% 51.1% Total Dividend 37.3% 25.7% Dividend Ratio 32.2% 46.% ** incl. impact of revaluation of DTA/DTL: 16.9% 26.9% ** 25.1% 3.9% 266.1 252.4 2 1 122.4 25. 18.1 97.4 18.1 158.6 158.6 165.8 147.8 137. 137. 147.8 158.6 158.6 165.8 87.1 62.1 179. 19.3 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 * US GAAP up to FY15, IFRS from FY16 1
Honda Corporate Update Business Status Business Strategy Automobile Business Operations Motorcycle Business Operations 23 Vision Other Topics Financial Highlights 11
Inter-regional coordination and collaboration Further enhance inter-regional coordination and collaboration and increase the efficiency of our operations from a global perspective. 12
Global models: Accord, Civic, CR-V, Vezel/ HR-V and Fit/ Jazz Accord Civic CR-V Sharing of down-sized turbocharged engine at some trim levels Focus on platform and parts commonality Accord - All-new Accord launched in October 217 in N.A. to be followed by other markets Civic - Underwent full model change in 215 in N.A. and successfully launched in global market - Shares commonized platform between sedan, coupe and hatchback CR-V - All-new CR-V underwent full model change in 216 in N.A. and global launch to be completed by 218. Vezel/ HR-V - Grew into strong model and became one of the global models since its launch in 213 Vezel/ HR-V Focus on platform and parts commonality Other Derivative models *Derivative models: City/Grace, Greiz and XR-V Fit 8% Accord 1% 5.3mil CY217 Vezel 1% Civic 16% CR-V 14% Fit/ Jazz Global Models continue to be widely popular representing approx. 7% of CY217 global Honda unit sales 13
Global models: Direction of Model Development 213 214 215 216 217 Fit HR-V Global Operation Reform Concurrent development in all six regions Adoption of locally optimized design Civic CR-V Accord Further enhance electrification, autonomous driving and connectivity technologies. Spearhead industry effort to realize a carbon-free and collision-free mobile society. Adopt Lead-Country Introduction Strategy (Clarification of which region is responsible for model development leadership and increase model development efficiency.) Introduction of modular strategies Increase commonality of platform and parts (Civic, CR-V and Accord) Introduce advanced platforms to accommodate electrification of powertrains 14
Global Model Introductions Civic Sedan North America ASIA China Brazil Europe Japan CY215 CY216 CY217 CY218 CY219 November March April August April September Civic Sedan CR-V (PE) North America ASIA Brazil CY215 CY216 CY217 CY218 CY219 November April June China Europe July September CR-V Japan August 15
Regional Models China: Brand differentiation between two Joint Ventures GAC Dongfeng North America: Light Truck models Crider UR-V Pilot Odyssey Avancier XR-V Ridgeline Asia: Meet demand in each country with affordable models Japan: Mini-vehicles Mobilio BR-V N-Box N-Box + Brio Amaze N-One N-WGN Introduction of regional models has also been expanding in each region. 16
Flexible Global Production Infrastructure Utilization Image Japan (Units) Europe 2, Primarily Civic 5D production Middle East and Africa 1, Accord & L/T models Civic 5D Jazz CR-V, HR-V (plan) 1.6 mil <Export> Global Models & Electrified models Civic 5D 1-2% for Other regions 8-9% for Local markets Electrified models Clarity Series Civic City Acura North America 1.92 mil <Export> Acura, L/T models, Accord & CR-V CR-V South America Asia 93, China 15, <Export> Strengthen mutual parts/model sharing within Asia Export to Africa 1.13 mil <Export> Leverage local cost benefit for next markets (Africa) Total Capacity approx. 5.4 mil units (Since April 217) Capacity increase to 5.7 mil Establish stable production structure leveraging regional capacity + mutual parts/model sharing 17
Mutually Complementary System for our Global Operations Advance our six-region global operation structure through inter-regional cooperation and coordination Flexible production system complementary production allocation between regions Supply Civic hatchback from the UK to North America and Japan WR-V was developed mainly for South America but is now also sold in Asia. 18
Global Production Capacity Unit (thousand) 5,55-15 5,4 +12 5,52-25 5,27 Other China 151 1,8 +5 (Export only) 151 1,8 +5 (Export only) 151 1,2 +5 151 1,2 +5 Asia Europe North America 1,8 FY217 93 93 Thailand Plan China Dongfeng +12-15 2 2 2 1,923 1,923 1,923 Plan Japan Saitama -25 Brazil Sumare -12 Itirapina +12 93 2 1,923 Japan 1,66 1,66 1,66 816 as of Mar '16 Apr '17 Plan '19 Plan '22 19
Automobile New Model Introductions (main models only) Already Launched in 218 To be launched Acura RDX: N.A. Insight: N.A. Everus EV: China (218) Mar Apr May Jun Jul Aug Sep Oct Nov Dec Amaze: India Clarity PHEV: Japan N-VAN: Japan * Please note that To be launched models reflect the current plan and is subject to change. Also, photos are from currently available sources and are not actual specification models. Inspire: China (218) 2
Automobile Operations by Regions <Industry> 7,5 Registered vehicles Mini vehicles 5,211 4,61 4,753 5, Japan 5,692 5,297 4,937 5,77 5,195 <Industry> 2, 15, Passenger Cars Light Trucks 14,491 11,588 12,777 United States 15,6 16,522 Unit (thousands) 17,479 17,55 17,23 1, 2,5 5, FY11 12 13 14 15 16 17 18 Source: JAMA <Honda> 1, Registered vehicles 848 Mini vehicles 788 717 74 711 725 75 68 61 5 CY1 11 12 13 14 15 16 17 Source: Autodata <Honda> 2, 1,5 1, Acura Honda Passenger Cars Honda Light Trucks 1,525 1,423 1,541 1,587 1,259 1,147 1,638 1,641 25 5 FY'11 12 13 14 15 16 17 18 Source: Honda CY1 11 12 13 14 15 16 17 Source: Honda Improve capacity utilization through exporting global models Increase production capacity of light truck models to meet industry demand 21
Model Allocation: North America Production Allocation Production Plant Ohio East Liberty Plant Alabama RDX CR-V MDX Pilot 216 Odyssey Ridgeline Shift 217 MDX As of the end of 217 Indiana Civic CR-V Split Global Source Ohio(East Liberty) RDX CR-V MDX Indiana Civic CR-V Civic Mexico El Salto CR-V Shift HR-V Alabama Global Source Export to N.A. Civic Pilot Ridgeline Odyssey 22
Model Allocation: North America Production Allocation Production Plant 218 219 East Liberty MDX Ohio Marysville Accord Ohio East Liberty Plant RDX CR-V MDX CR-V CR-V Ohio Marysville Plant Accord TLX / ILX RDX TLX CR-V CR-V Indiana Civic Insight Brand-New Indiana Canada Ontario CR-V Civic Civic CR-V Insight 23
Automobile Operations by Regions <Industry> 8, 4,796 4,493 4, Asia (Five main markets in Asia) * India: excluding commercial Malaysia Thailand vehicles and pickups Indonesia Philippines 5,965 India 5,696 5,748 5,477 5,464 5,478 <Industry> China (excluding commercial vehicles) 3, Minivan SUV MPV Sedan 21,146 19,71 2, 17,929 15,495 13,757 14,473 1, 24,378 24,719 Unit (thousands) CY1 11 12 13 14 15 16 17 Source: Honda <Honda> CY1 11 12 13 14 15 16 17 Source: Honda <Honda> 75 5 25 Malaysia Indonesia India 297 227 Thailand Philippines 474 356 524 587 578 629 1,5 1, 5 Acura SUV MPV Sedan 652 622 599 28-214 Wholesale 215-216 Retail 1,256 1,1 757 793 1,458 CY1 11 12 13 14 15 16 17 Source: Honda CY1 11 12 13 14 15 16 17 Source: Honda Introduce new models to meet specific market needs in each Asian market. Further expand sister model strategy. 24
Regional Models: China Segment Sedan(4D/5D) SUV MPV D GAC Dongfeng Accord (May 218) Spirior Inspire (Planned in 218) Avancier UR-V (Mar 217) Odyssey Elysion GAC Crider Jade C B Dongfeng GAC Civic CR-V (July 217) Fit City Vezel Two joint ventures offer different model types consistent with their respective brand image Dongfeng Gienia Greiz XR-V By utilizing common platforms and strengthening local procurement and R&D functions, successive launch of cost competitive models being realized. 25
Automobile Operations by Regions <Industry> 2, Europe (EU+EFTA) (excluding commercial vehicles) 13,743 13,542 14,95 15,132 15,632 15, 12,452 12,24 12,913 <Industry> 5, Brazil (Main market in Other Region) 3,634 3,58 3,329 3,426 3,333 * excluding trucks Unit (thousands) 1, 2,5 2,481 1,989 2,176 5, CY1 11 12 13 14 15 16 17 Source: ACEA / Honda <Honda> (EU and EFTA) 4 CY1 11 12 13 14 15 16 17 Source: ANFAVEA <Honda> 2 3 126 135 139 138 153 123 131 2 187 15 141 14 133 132 138 12 1 93 1 CY1 11 12 13 14 15 16 17 Source: ACEA / Honda CY1 11 12 13 14 15 16 17 Source: Honda U.K. has been designated to serve as global supply base of the Civic Series. Improve Forex toughness by increasing local procurement and localization of development. 26
Roadmap for Environmental Technologies Strive to electrify two-thirds of all vehicles we sell globally by 23 (CO2(g/km) FCX (22) FCX Clarity (28) Clarity Fuel Cell (216) Accord PHEV (213) Clarity BEV (217) Clarity PHEV (217) Global expansion ZERO emissions technology Technologies to increase electrical efficiency CR-V HEV (217) Turbo engine Global expansion Technologies to increase thermal efficiency DI engine CVT / DCT 2 21 215 22 23 CY218 CY219 CY22 FCV BEV@China Clarity Plug-in Hybrid@Japan Urban EV @Europe NEW FCV Urban EV @Japan CDX Hybrid@China ACCORD Hybrid@NA Insight Hybrid@NA CR-V Hybrid @Japan, Europe 27
Leverage our strengths Honda s Approach to Automobile Electrification We expect that two-thirds of global automobile unit sales will be electrified by 23. Electrification = HEV + PHEV + BEV + FCV Optimize the technologies and experiences cultivated in HEV development for electrification expansion. Key technologies we will focus on for Electrification Cooperative control Battery management Electric motors Maximize cooperative control systems to fully extract and utilize the performance of the powertrain and related devices. Maximize energy management performance and enhance heat management technologies to extend battery performance. Established JV with Hitachi AMS for development, manufacture and sale of Honda s state-of-the-art electric motors to combine our compact high-power technology with their mass-production expertise. Reinforce organization Established Electric Vehicle Development Division which will oversee comprehensive vehicle development, including the powertrain and chassis, in order to further increase development speed. 28
Roadmap for Environmental Technologies: Clarity Series 3-in-1 Clarity series provides unparalleled electric drive choice with premium midsize sedan capability and three advanced electrified powertrains in a single vehicle platform to efficiently address cost and manufacturability PHEV: Benefits of both Hybrids and BEVs BEV: Affordable model for daily use FCV: Ultimate zero-emissions vehicle - Clarity Plug-in Hybrid earned a class-leading 47-mile EV driving range rating and 34-mile extended range rating, launched in the U.S.(217) and will be launched in Japan (218). - Clarity Electric, a spacious, comfortable and affordable sedan that suits their daily driving needs was launched in the U.S.(217). - Clarity Fuel Cell, only five-passenger FCV sedan in the industry, was launched in Japan in March 216 and in the U.S. in December 216, respectively. 29
BEV/PHEV Model Introductions FY18 FY2 FY21 BEV China GAC Dongfeng SUV SUV North America Clarity(D-category) Europe Japan Urban EV (B-category) Urban EV PHEV North America Japan Regulation New ZEV (U.S.) Clarity(D-category) Clarity(D-category) NEV(China) Urban EV Concept Everus EV Concept Clarity Plug-In Hybrid 3
Toward realization of a collision-free mobile society * For Acura vehicles, called Acura Watch Expanding adoption of Honda SENSING Japan: Make Honda SENSEING standard equipment on all new models to be introduced North America/ China/ Europe/ Other regions: Expanding application to all-new models 31
Automated Driving Roadmap - Strive to realize automated lane-changing function which enables the vehicle to drive in multiple lanes without any command from the driver on highways in 22 - Strive to achieve the technological establishment of level 4 automated driving for use in personal cars by around 225 32
Honda s approach to the new business environment Autonomous Driving Waymo SenseTime Electrification Hitachi AMS (EV Motor) Neusoft(China EV) General Motors (EV Battery, FC Stack) Artificial Intelligence Softbank (Emotion Engine) Kyoto University Boston University (Information Security) Car Sharing Reachstar (China) Grab (Asia) - Motorcycles Connectivity Softbank (5G Mobile Communication System) Alibaba (Honda CONNECT) New Organizational Structure R&D Center X Honda Xcelerator - Global expansion 33
Honda Corporate Update Business Status Business Strategy Automobile Business Operations Motorcycle Business Operations 23 Vision Other Topics Financial Highlights 34
Overview of Motorcycle Business Yen (billion) 3 Operating Profit and Margin 13.1% 1.6% 1.5% 1.4% 1.1% 9.9% 2 8.2% 1 143 11 177 192 182 171 267 FY212 213 214 215 216 217 218 Honda M/C Business = High Profitability + Stability + Growth Potential Unit (thousand) 2, 15, Honda Global Unit Sales 15,61 15,494 17,8 17,592 17,55 17,661 19,554 2,85 1, 5, FY212 213 214 215 216 217 218 219(P) *Operating profit and margin, and Unit sales until FY13 are based on US GAAP while FY14 and after are based on IFRS 35
Motorcycle Market Size and Honda Share (CY217) Motorcycle production at 35 plants in 21 countries Thailand 1.8 mil Vietnam 3.3 mil Europe 1.1 mil Italy 16% China Pakistan Bangladesh India 8% Vietnam Japan.4 mil 72% 44 % 21% U.S.A (MC+ATV).7 mil Mexico U.S.A (ATV, S S) Nigeria Kenya Thailand Malaysia Philippines Peru India 19.2 mil 28% Indonesia Indonesia 5.9 mil 75% Brazil Argentine 82% Brazil.8 mil *Market share excluding 5cc Annual Production Capacity in India 5.8mil in 216 6.4mil in 217 36
GDP per capita (USD) Growth in Motorcycle Popularity 1.8mil Thailand (CY217) 4, 3, Nigeria Philippines Indonesia 5.9mil 2, Kenya Bangladesh Myanmar India 19.2 mil 3.3mil Vietnam 1, Pakistan Source: Honda & IMF.2mil Next Markets Growing Markets Mature Markets Motorcycle Market Penetration in Asia India 8% (millions) 1,339 Indonesia 25% 264 Significant growth expected Vietnam Thailand 33% 96 4% 69 Number of motorcycles units in operation Population Source: Honda & United Nations Note: penetration rate is as of 217 37
Motorcycle Market Share Trend in India 5% 45% 4% 35% Hero Honda India Company A (Wholesale) Fast Growing Segment Scooter / Motorcycle Sales Ratio (Industry) In CY211 SC 18% In CY217 MC MC 67% 82% SC 33% 3% 25% 2% 15% Company B Honda Company C Scooter Unit Sales of Honda / Competitors and Honda Share in Scooter Market 7, 6, 5, Competitors (Unit) Honda (Unit) Honda Share(%) 7% 6% 5% 1% 4, 4% 5% Company D 3, 3% % CY21 211 212 213 214 215 216 217 2, 2% Honda is now No.2 in market share. 1, CY21 211 212 213 214 215 216 217 1% % 38
India Motorcycle Operations Capacity Expansion 4th 1 st 2 nd Gujarat Manesar Rajasthan Expanded annual production capacity to 6.4 mil. 4.6mil 4.6mil 4.mil 5.8mil 1.2 1.2 1.8 1.8 1.8 6.4mil 1.2 2.4 4th 3 rd 3 rd Karnataka 1.2 1.2 1.2 1.2 1.2 1.6 1.6 1.6 1.6 1.6 2 nd 1 st CY213 214 215 216 217 Product Line-up 11cc AT-Scooter Activa 11cc AT-Scooter Dio 125cc Motorcycle CB Shine 11cc Motorcycle Dream Yuga 39
Electrification in Motorcycle and Mobile Battery Introduce PCX ELECTRIC / PCX HYBRID in Japan (218). For future expansion of electric motorcycles/scooters: - Honda and Panasonic to Begin Research Experiment on Battery Sharing Using Detachable Mobile Batteries and Electric Motorcycles in Indonesia - Utilizing electric commuters, which feature a detachable mobile battery is under consideration (in collaboration with the Japan Post Co., Ltd.) - E-KIZUNA project with Saitama-city and Yamaha Motor Co., Ltd. is conducting an experiment involving electric motorcycles and replacement of batteries. EV motorcycle sharing scheme also under consideration. PCX ELECTRIC Honda Mobile Power Pack Honda Mobile Power Pack Exchanger 4
Honda Corporate Update Business Status Business Strategy Automobile Business Operations Motorcycle Business Operations 23 Vision Other Topics Financial Highlights 41
23 Vision 42
23 Vision - Focus on three areas: Mobility, Robotics and Energy - Strive to further expand the joy of people by offering products and services - Strive to become No.1 in the areas of the environment and safety 43
Honda Corporate Update Business Status Business Strategy Automobile Business Operations Motorcycle Business Operations 23 Vision Other Topics Financial Highlights 44
The Company with Audit and Supervisory Committee Directors (excluding Audit and Supervisory Committee Members) Directors (serving as Audit and Supervisory Committee Members) Internal Outside Directors Total 7 2 9 2 3 5 Total 9 5 14 - For faster decision making, transfer of authority to Executive Council from Board of Directors to resolve most matters - Board of Directors will focus more on discussions of mid to long term business strategies, as well as strengthening of oversight function 45
External Evaluation on Honda s Stakeholder Engagement Selected to the Dow Jones Sustainability World Index In September 217, Honda was selected for the first time as a component of the Dow Jones Sustainability World Index after being ranked fifth in the global Automobiles sector in the annual review of the Dow Jones Sustainability Indices (DJSI), one of the key benchmarks for socially responsible investing. At the same time, the Company was selected for the third consecutive year as a component of the Dow Jones Sustainability Asia/Pacific Index. The DJSI are investment indices run and offered cooperatively by U.S.-based S&P Dow Jones Indices and Switzerland-based RobecoSAM. The sustainability of the world s leading companies are evaluated from three perspectives in terms of economic, environmental and social criteria and select companies that demonstrate overall excellence for inclusion in the indices. Selected for the Third Straight Year with a Bronze Class Rating in the RobecoSAM Sustainability Index Honda was selected for the third year running with a Bronze Class rating in the Automobiles sector of the Sustainability Award 218 issued by Switzerland-based RobecoSAM. RobecoSAM evaluates sustainability of approximately 2,5 companies worldwide in terms of economic, environmental and social criteria. Companies deemed to be particularly outstanding in each sector are rated in categories of Gold Class, Silver Class and Bronze Class each year. Securing an A- on the CDP Japan 5 Climate Change Report 217 In October 217, CDP released the results of a survey on climate change initiatives and reduction of GHG emissions for 5, major companies worldwide. Honda received an A- rating, a score at the leadership level, in recognition of activities deemed to be best practices in environmental management in the CDP Japan 5 Climate Change Report 217, one of those categories. CDP is an international NPO that provides a global system for measuring, disclosing, managing and sharing important environmental information from companies and cities. Company initiatives in environmental challenges are evaluated in the four stages of information disclosure, awareness, management and leadership. 46
Honda Corporate Update Business Status Business Strategy Automobile Business Operations Motorcycle Business Operations 23 Vision Other Topics Financial Highlights 47
1st Quarter Unit Sales Honda Group Unit Sales 1Q Results (3 Months) FY18 Change Motorcycles 4,699 5,352 +13.9% Automobiles 1,267 1,35 +3.% Power Products 1,331 1,341 +.8% Consolidated Unit Sales (thousand) (thousand) 1Q Results (3 Months) FY18 Change Motorcycles 3,245 3,615 +11.4% Automobiles 9 952 +5.8% Power Products 1,331 1,341 +.8% 1, 1,1 1,2 1,3 1,4 1,5 1,6 1,7 1,8 1,9 2, 2,1 2,2 2,3 2,4 2,5 2,6 2,7 2,8 2,9 3, 3,1 3,2 3,3 3,4 3,5 3,6 3,7 3,8 3,9 4, 4,1 4,2 4,3 4,4 4,5 4,6 4,7 4,8 4,9 5, 5,1 5,2 5,3 5,4 5,5 5,6 5,7 1 2 3 4 5 6 7 8 9 3,9 4, 3,1 3,2 3,3 3,4 3,5 3,6 3,7 3,8 2,4 2,5 2,6 2,7 2,8 2,9 3, 1,7 1,8 1,9 2, 2,1 2,2 2,3 1, 1,1 1,2 1,3 1,4 1,5 1,6 9 2 3 4 5 6 7 8 1 Honda Group Unit Sales 1,4 1,3 1,2 1,1 1, 9 8 7 6 5 4 3 2 1 Consolidated Unit Sales 1, 9 8 7 6 5 4 3 2 1 FY18 5,352 1,267 1,35 4,699 3,615 3,245 9 952 Unit (thousand) 1,9 1,8 1,7 1,6 1,5 1,4 1,3 1,2 1,1 1, 9 8 7 6 5 4 3 2 1 1,9 1,8 1,7 1,6 1,5 1,4 1,3 1,2 1,1 1, 9 8 7 6 5 4 3 2 1 1,331 1,341 Motorcycles Automobiles Power Products 1,331 1,341 Motorcycles Automobiles Power Products Honda Group Unit Sales Increase in motorcycle unit sales due mainly to sales growth in Indonesia, India and Vietnam Increase in automobile unit sales due mainly to sales growth in the U.S. and Japan 48
1st Quarter Financial Results (Consolidated) Financial Results Yen (billion) FY18 Change Sales revenue 3,713. 4,24.1 +8.4% Operating profit 269.2 299.3 +11.2% Operating margin 7.3% 7.4% +.1pt Share of profit of investments accounted for using the equity method 52.9 54.3 +2.6% Profit before income taxes 335. 358.2 +6.9% Profit for the period attributable to owners of the parent 27.3 244.3 +17.8% Earnings per share attributable to owners of the parent (Yen) 115.4 137.75 +22.71 Market average rates (Yen) * Please refer to the footnotes on the last page U.S. Dollar 111 19 * 1Q Results (3 Months) Yen up by 2 yen Financial Summary Sales revenue increased by 8.4% primarily due to sales increases in all business operations. Operating profit increased by 11.2% due primarily to the positive impact from revenue and model mix and a decrease in SG&A expenses. Operating Profit Yen (billion) 269.2 299.3 284.5 FY18 Operating Margin 1% 8% 7.4% FY18 152.9 126.8 第 1 四半期第 2 四半期第 3 四半期第 4 四半期 6% 4% 2% % 7.3% 4.1% (excl. litigation settlement 5.5%) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 7.2% 3.2% 第 1 四半期第 2 四半期第 3 四半期第 4 四半期 49
Motorcycles - Honda Group Unit Sales (Motorcycles, All-Terrain Vehicles, Side-by-Side etc.) Unit (thousand) 7, 6, Activa (India) <Asia> Increased sales in Indonesia, India and Vietnam + 653 ( + 13.9 % ) 5, 4, 3, 2, 4,699 5,238 4,87 4,747 5,352 1, 1Q 2Q 3Q 4Q 1Q FY18 Japan 42 42 42 41 49 North America 8 83 69 81 72 Europe 81 53 39 61 8 Asia 4,219 4,84 4,437 4,26 4,84 Other Regions 277 256 283 34 311 Total 4,699 5,238 4,87 4,747 5,352 5
Automobiles - Honda Group Unit Sales Unit (thousand) 1,5 Pilot (U.S.) <North America> Increased sales of Pilot in the U.S. <Japan> Increased sales of N-BOX + 38 ( + 3. % ) 1, 5 1,267 1,292 1,344 1,296 1,35 1Q 2Q 3Q 4Q 1Q FY18 Japan 157 167 174 198 162 North America 481 452 491 478 518 Europe 42 43 42 56 42 Asia 523 57 578 495 52 Other Regions 64 6 59 69 63 Total 1,267 1,292 1,344 1,296 1,35 51
Change in Profit before Income Taxes < 1st Qtr> Profit before Income Taxes +23.2 ( + 6.9 % ) Yen (billion) Operating Profit +3.1 ( + 11.2 % ) (Excluding currency effects + 55.8 ) 335. Operating Profit 269.2 FY18 1Q + 36.8 Revenue, model mix, etc. + 18.3 Cost Reduction, etc. <Increase Factors> - Impact from sales volume and model mix, etc. <Decrease Factors> - Impact of Mexico plant flooding, etc. + 19.6 SG&A - 18.9 R&D - 25.6 Currency Effects + 1.3 Share of profit of investments accounted for using the equity method - JPY / USD -14. - USD / Others (BRL, CAD, MXN) +1. - JPY / Asian Currencies (INR, THB, VND, CNY, IDR) +1. - Others -13.6-8.2 Finance income and Finance costs - Currency Effects -6.6 - Interest rate swap /currency swap -3.8 - Others +2.2 358.2 Operating Profit 299.3 1Q 52
Motorcycle Business Sales Revenue /Operating Profit (Margin) Unit (thousand) FY18 Yen (billion) 1Q 2Q 3Q 4Q 1Q Honda Group Unit Sales 4,699 5,238 4,87 4,747 5,352 (Consolidated Unit Sales) (3,245) (3,446) (3,96) (3,167) (3,615) Sales Revenue 58.5 51.1 499.1 52.9 554.9 Yen (billion) Operating Profit Operating Margin ( + 9.1 % ) + 46.3 (Currency effect - 17.1) 15.5% 13.4% 13.% 1.5% 16.6% 2% 15% 1% <Increase Factors> Positive impact from sales volume and model mix, etc. ( + 16.9 % ) 5% % -5% 78.8 68.5 64.8 54.8 92.1-1% -15% 1Q 2Q 3Q 4Q 1Q FY18-2% 53
Automobile Business Sales Revenue/Operating Profit (Margin) Unit (thousand) FY18 Yen (billion) 1Q 2Q 3Q 4Q 1Q Honda Group Unit Sales 1,267 1,292 1,344 1,296 1,35 (Consolidated Unit Sales) (9) (97) (932) (95) (952) Sales Revenue 2,624.5 2,693. 2,91.4 2,826.1 2,845.1 Yen (billion) Operating Profit Operating Margin ( + 8.4 % ) + 22.6 (Currency effect - 27.6) 1% 5.3% (excl. Litigation settlement:3.4%) 1.5% 5.8%.9% 5.3% <Increase Factors> Decrease in SG&A Positive impact from sales volume and model mix etc. ( + 8.1 % ) % -1% 14.3 167.4 151.6 39.2 26.7 1Q 2Q 3Q 4Q 1Q FY18-2% 54
Power Product & Other Businesses Sales Revenue/Operating Profit (Margin) Unit (thousand) FY18 Yen (billion) 1Q 2Q 3Q 4Q 1Q Honda Group * Unit Sales 1,331 1,258 1,196 2,477 1,341 (Consolidated Unit Sales) (1,331) (1,258) (1,196) (2,477) (1,341) Sales Revenue 83.1 87.8 93.4 16.7 87.8 1 Yen (billion) Operating Profit Operating Margin 8 6 4 2-2 -4-6.1.2% -2. -2.3% ( + 5.7 % ) + 4.7 (Currency effect +.2) <Decrease Factors> Increased expenses in other businesses operations etc. 1.7% 1.5-3. -2.8% -1.6-1.8% 1% 5% % -5% -8-1 (For reference) Operating profit from aircraft and aircraft engines 1Q 2Q 3Q 4Q 1Q FY18-8.5-13.6-8. - 11.5-1. * Honda Group Unit Sales and Consolidated Unit Sales include only power product units. -1% 55
Financial Services Business Total Assets/Sales Revenue/Operating Profit (Margin) FY18 Yen (billion) 1Q 2Q 3Q 4Q 1Q Total Assets of Finance Subsidiaries 9,494.4 9,688.7 9,867.1 9,49.2 9,738.2 Sales Revenue 539.6 539.5 527.1 53.8 593.1 Yen (billion) Operating Profit Operating Margin ( + 9.9 % ) + 53.4 (Currency effect - 9.9) 12 9.2% 8.8% 9.6% 9.1% 9.6% 15% 1% 1 8 <Increase Factors> Increase in operating lease revenues, etc. ( + 14.7 % ) 5% % 6-5% 4 2 49.8 47.2 5.7 48.2 57.1-1% -15% 1Q 2Q 3Q 4Q 1Q FY18-2% 56
Sales Revenue/Operating Profit (Margin) by Geographical Segment < 1st Qtr> Yen (billion) FY18 FY18 FY18 FY18 FY18 Sales Revenue Japan North America Europe Asia Other Regions 1Q 1Q 1Q 1Q 1Q 1,25. 1,14.2 2,13.1 2,313.3 213.2 237.2 981.7 1,95.7 23.8 23.3 Operating Profit : Yen (billion) 15 1 5 11.5 11.3 97.8 122.5 21.5 14.7 6.6 7. 14.7 22.6-31.7 % +8.6 % + 5.7 % + 25.2 % + 53.7 % -5 FY18 FY18 FY18 FY18 FY18 1Q 1Q 1Q 1Q 1Q 57
Share of Profit of Investments Accounted for Using the Equity Method Yen (billion) 1 +1.3 ( + 2.6 % ) 8 6 4 82.2 2 52.9 54.5 57.9 54.3 1Q 2Q 3Q 4Q 1Q FY18 From Asia 46.3 57.9 47. 55.8 44.6 58
Forecast: Capital Expenditures, Depreciation and R&D No changes have been made to the previous forecasts (on April 27, 218) Yen (billion) FY18 Results Forecast Capital expenditures *1 433.8 48. +46.2 - Depreciation and amortization *1 467.3 455. -12.3 - Research and development expenditures Change Change from previous forecast *2 73.7 79. +59.2 - *1 Capital expenditures as well as Depreciation and amortization in results and forecast aforementioned exclude investment in operating leases, finance leases and intangible assets. *2 Research and development expenditures are research and development activity related costs incurred during the reporting period. In accordance with IFRS, a portion of research and development expenditures is recognized as an intangible asset and amortized over its estimated useful life. As such, this amount is not in conformity with "Research and development" on our Consolidated Statements of Income. 8 Capital Expenditures 8% 8 Depreciation 8% 8 R&D Expenditures 8% 6 6% 6 6% 6 6% 4 4% 4 4% 4 4% 2 2% 2 2% 2 US GAAP IFRS US GAAP IFRS US GAAP IFRS FY12 13 14 15 16 17 18 19P % FY12 13 14 15 16 17 18 19P % FY12 13 14 15 16 17 18 19P Amounts % against Sales 2% % 59
Cash Flows of Non-financial Services Businesses FY18 Three Months Net Change - 76.7 Yen (billion) + 184.5-176.3 2,2.5-88.9 + 3.9 1,925.7 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes Net Cash 1,524.8 Cash & Cash equivalents at beginning of FY18 Free cash flow + 8.2 Net Cash 1.446.4 Cash & Cash equivalents at end of period Three Months Net Change - 83.6 + 273.1-222. 2,15.1-134. -.8 2,66.4 Net Cash 1,678.1 Cash flows from operating activities Free cash flow + 51.1 Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes Net Cash 1,6.9 Cash & Cash equivalents at beginning of Cash & Cash equivalents at end of period 6
Caution with Respect to Forward-Looking Statements: This slide contains forward-looking statements about the performance of Honda, which 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 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 fluctuation of foreign exchange rates, as well as other factors detailed from time to time. Accounting standards: Our consolidated financial statements are prepared in conformity with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) Notice on the Factors for Increases and Decreases in Income: With respect to the discussion above of the change in Operating profit, management has identified the factors set forth below and used what it believes to be a reasonable method to analyze the respective changes in such factors. Each of these factors is explained below. Management has analyzed changes in these factors at the levels of the Company and its material consolidated subsidiaries. (1) Currency effects consist of translation adjustments, which come from the translation of the currency of foreign subsidiaries financial statements into Japanese Yen, and foreign currency adjustments, which result from foreign-currency-denominated sales, which, at the levels of the Company and those consolidated subsidiaries which have been analyzed, primarily relate to the following currencies: U.S. dollar, Canada dollar, Euro, GBP, BRL and Japanese Yen. (2) With respect to Cost reduction, etc., management has analyzed cost reduction and effects of raw material cost fluctuations at the levels of the Company and its material foreign manufacturing subsidiaries in North America, Europe and other regions. (3) With respect to Revenue, model mix, etc., management has analyzed changes in sales volume and in the mix of product models sold in major markets which have resulted in increases/decreases in profit, as well as certain other reasons for increases/decreases in sales revenue and cost of sales. (4) With respect to Selling, General and Administrative expenses, management has analyzed reasons for an increase/decrease in selling, general and administrative expenses from the previous fiscal year net of currency translation effects. (5) With respect to Research and Development expenses, management has analyzed reasons for an increase/decrease in research and development expenses from the previous fiscal year net of currency translation effects. Unit sales: Motorcycle Business Honda Group Unit Sales is the total unit sales of completed products, including motorcycles, ATVs, and Side-by-Side of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. Automobile Business Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. Certain sales of automobiles that are financed with residual value type auto loans by our Japanese finance subsidiaries and sold through our consolidated subsidiaries are accounted for as operating leases in conformity with IFRS and are not included in consolidated sales revenue to the external customers in our Automobile business. Accordingly, they are not included in Consolidated Unit Sales, but are included in Honda Group Unit Sales of our Automobile business. Power Product Businesses Honda Group Unit Sales is the total unit sales of completed power products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed power products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed power products of Honda and its consolidated subsidiaries. In Power Product business, there is no discrepancy between Honda Group Unit Sales and Consolidated Unit Sales since no affiliate and joint venture accounted for using the equity method was involved in the sale of Honda power products. 61