HONDA MOTOR CO LTD Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Results: FY '24 operating profit was a historical high of JPY 1,381.9 billion with an operating profit margin of 6.8%. Cash flows from operating activities, excluding R&D expenses, were roughly JPY 3 trillion, up JPY 1 trillion year-on-year.
• Initiatives:
  • Motorcycle business: Expanded in Asia, advanced nations, and South America to build a balanced global income structure.
  • Automobile business: Increased model commonality, reduced hybrid system costs, and will evolve hybrid performance and cost in the second half of the decade.
• Shareholder Returns: FY '24 dividend was JPY 68, up JPY 28 year-on-year. FY '25 plans to acquire JPY 300 billion of company shares and maintain a stable dividend policy.
• Corporate Value Enhancement: Aiming to optimize capital through proactive shareholder returns, build and maintain an earning base, and refine electrification strategy to achieve a PBR over 1.

Segment Performance

• Motorcycle business: Operating profit was JPY 556.2 billion. It has expanded in Asia, advanced nations, and South America to strengthen the business structure.
• Automobile business: Operating profit was JPY 560.6 billion. It increased commonality of car models like CR-V, Civic, and Accord, reduced hybrid system costs, and aims to evolve hybrid performance and cost in the second half of the decade.
• Financial services business: Operating profit was JPY 273.9 billion.
• Power products and other businesses: Incurred an operating loss of JPY 8.8 billion.

Guidance

• FY '25 Financial Outlook: Operating profit target is JPY 1.420 billion with an operating profit margin of 7%, 1 year ahead of the original plan.
• Share Buybacks: Plan to acquire JPY 300 billion of company shares in FY '25.
• Dividend: FY '25 dividend expected to be JPY 68 per share, same as FY '24.
• Foreign Exchange: Foreign exchange assumption set at JPY 140 for dollar throughout FY '25.

Risks

• Currency Fluctuations: Impact on financial results due to changes in foreign exchange rates.
• Market Regulations: Varying regulations in different regions affecting business operations.
• Intense Competition: Fierce competition in automotive and motorcycle markets affecting market share and profitability.

Question and Answer

• Q: About China business marketing strategy and production capacity optimization A: Shinji Aoyama mentioned the YE series will be introduced in China, with the first battery EV platform models like P7 and S7 launched in the second half of FY '25. Regarding production capacity, will consult with joint venture partners and has included expenses in FY '25 budget for optimization.
• Q: Reason for Mibe's attendance at earnings call A: Toshihiro Mibe explained it's due to transformation challenges and wanting to directly communicate current management situation and short-to-midterm plans as the first President to attend such a meeting.
• Q: R&D spending and electrification strategy A: Eiji Fujimura stated R&D spending will be the highest ever, with increased investment in electrification, including vertical battery system development and software internalization. Details to be explained at the 2024 Honda business briefing on May 16.
• Q: Hybrid competitiveness and automotive business margin A: Toshihiro Mibe and Eiji Fujimura discussed hybrid's current strength, with plans to evolve it in the second half of the decade to compete effectively. For automotive margin improvement, efforts include raising prices in key markets, reducing incentives, and co-creating with suppliers to enhance cost competitiveness.
• Q: Yen depreciation impact and Japan business A: Toshihiro Mibe commented on yen depreciation's mixed impact, noting abrupt changes are not welcome but the power of Japanese businesses will be appreciated better with internal demand. For Japan business, plans include introducing electrification products to raise appeal.
• Q: FY '25 operating profit breakdown and Japan business unit sales A: Eiji Fujimura explained the JPY 502 billion operating profit increase includes positive impacts from selling price and cost management. For Japan business unit sales, factors like semiconductor shortages and market trends are considered, with plans to introduce competitive products to achieve target unit sales.
• Q: EV market and collaboration with Nissan A: Toshihiro Mibe stated EV goals remain unchanged, with plans to establish foundations for 2 million EV sales by 2030. Regarding collaboration with Nissan, ongoing discussions on electrification, software, and product supplies are taking place, with progress expected soon.