Honda Motor Co., Ltd. Reports Consolidated Financial Results for the Fiscal Fourth Quarter and the Fiscal Year Ended March 31, 2008

TOKYO, April 25 /PRNewswire-FirstCall/ -- Honda Motor Co., Ltd. today announced its consolidated financial results for the fiscal fourth quarter and the fiscal year ended March 31, 2008.

Fourth Quarter Results

Honda's consolidated net income for the fiscal fourth quarter ended March 31, 2008 totaled JPY 25.4 billion (USD 254 million), a decrease of 85.6% from the same period in 2007, due to, among other things, increased income taxes. Basic net income per common share for the quarter amounted to JPY 14.01 (USD 0.14), a decrease of JPY 82.69 from JPY 96.70 for the corresponding period last year. One Honda American Depository Share represents one common share.

Consolidated net sales and other operating revenue (herein referred to as "revenue") for the quarter amounted to JPY 3,055.5 billion (USD 30,498 million), a decrease of 1.0% from the same period in 2007. Honda estimates that if calculated at the same exchange rate as the corresponding period in 2007, revenue for the quarter would have increased by approximately 4.4%.

Consolidated operating income for the quarter totaled JPY 168.8 billion (USD 1,685 million), a decrease of 32.5% compared to the same period last year. This decrease in operating income was primarily due to the negative impact of sales incentives in North America, increased raw material costs, depreciation expenses and SG&A expenses and currency effects caused by the appreciation of the Japanese yen, offsetting the positive impact of increased unit sales in automobile business, continuing cost reduction efforts and decreased R&D expenses.

Consolidated income before income taxes, minority interest and equity in income of affiliates for the quarter totaled JPY 146.8 billion (USD 1,466 million), a decrease of 38.6% from the same period in 2007.

Equity in income of affiliates amounted to JPY 24.3 billion (USD 243 million) for the quarter, an increase of 22.1% from the corresponding period last year. Equity in income of affiliates set record high for the fiscal fourth quarter.

Business Segment

With respect to Honda's sales for the fiscal fourth quarter by business segment, motorcycle unit sales totaled 2,368 thousand units, a decrease of 1.7% from the same period last year. Unit sales in Japan totaled 66 thousand units, a decrease of 16.5% compared to the same period last year. Overseas unit sales was 2,302 thousand units, a decrease of 1.2% from the same period in 2007, due mainly to a decline in unit sales in North America, Europe and Asia, more than offsetting favorable unit sales in other regions mainly in Latin America.

Revenue from external customers increased 5.3%, to JPY 444.0 billion (USD 4,432 million) from the same period last year, due mainly to increased revenue in Asia and other regions. Operating income increased by 19.3% to JPY 52.7 billion (USD 527 million) from the same period last year, due mainly to continuing cost reduction efforts, favorable model mix, decreased R&D expenses and positive currency effects mainly caused by weaker Japanese Yen against the Brazilian real, offsetting increased SG&A expenses.

Honda's automobile unit sales totaled 1,051 thousand units, an increase of 9.8% from the same period last year. In Japan, unit sales amounted to 191 thousand units, an increase of 1.1% from the same period last year. Overseas unit sales increased 12.0% to 860 thousand units from the corresponding period last year, due mainly to increased unit sales in all regions. Revenue from external customers decreased 3.0% to JPY 2,356.6 billion (USD 23,522 million) from the same period in 2007, due mainly to the negative impact of currency translation effect. Operating income decreased 49.6% to JPY 79.5 billion (USD 794 million) from the same period last year, due primarily to increased sales incentives in North America, the negative currency effects caused by appreciation of the Japanese yen, increased SG&A expenses and increased raw material costs, more than offsetting ongoing cost reduction efforts, increased unit sales and decreased R&D expenses.

Revenue from customers in financial services business increased 17.5% to JPY 138.0 billion (USD 1,378 million) from the same period in 2007, due mainly to an increase in operating lease revenues. Operating income decreased 23.4% to JPY 31.3 billion (USD 313 million) from the same period in 2007, due primarily to the increased SG&A expenses.

Honda's power product unit sales totaled 2,092 thousand units, a decrease of 1.7% from the same period in 2007. In Japan, unit sales totaled 151 thousand units, an increase of 8.6% from the same period last year. Overseas unit sales totaled 1,941 thousand units, a decrease of 2.4% from the corresponding period last year, due primarily to a decline of unit sales in North America.

Revenue from external customers in power product and other businesses decreased by 1.0% to JPY 116.8 billion (USD 1,166 million) from the same period last year, due mainly to decreased unit sales of power products and the negative impact of currency translation effects. Operating income decreased 29.2% to JPY 5.1 billion (USD 51 million) from the same period in 2007. This was primarily due to increased SG&A expenses and R&D expenses and the negative currency effects caused by the appreciation of the Japanese yen.

Geographical Information

With respect to Honda's sales for the fiscal fourth quarter by geographic area, in Japan, revenue for domestic and exports sales amounted to JPY 1,251.0 billion (USD 12,487 million), down 1.1% compared to the same period last year, due primarily to decreased revenue in motorcycle business. Operating income totaled JPY 2.3 billion (USD 24 million), down 96.5% from the same period last year due primarily to the negative impact of the currency effects caused by the appreciation of the Japanese yen and increased raw material costs.

In North America, revenue decreased by 11.2% to JPY 1,484.1 billion (USD 14,814 million) from the same period in 2007 due mainly to the negative impact of the currency translation effects. Operating income decreased by 50.8% to JPY 63.1 billion (USD 631 million) from the same period last year due primarily to increased sales incentives in automobile business, increased SG&A expenses, the negative impact of currency effects caused by appreciation of the Japanese yen and increased raw material costs, which compressed the positive impact of the increased unit sales of automobile business.

In Europe, revenue increased by 0.3% to JPY 441.3 billion (USD 4,405 million), from the same period in 2007 due primarily to increased revenue in automobile business. Operating income increased by 47.0% to JPY 18.6 billion (USD 186 million) from the same period last year due primarily to continuing cost reduction efforts and higher revenue, offsetting increased SG&A expenses.

In Asia, revenue increased by 13.4% to JPY 415.9 billion (USD 4,151 million) from the same period last year due primarily to increased revenue in motorcycle business and automobile business, offsetting the negative impact of the currency translation effects. Operating income increased by 14.6% to JPY 21.9 billion (USD 220 million) from the corresponding period last year due mainly to higher revenue, more than offsetting increased SG&A expenses.

In other regions, revenue increased by 35.7% to JPY 313.9 billion (USD 3,134 million) compared to the same period last year due mainly to increased revenue in all business segments. Operating income increased by 67.8% to JPY 32.7 billion (USD 327 million) from the corresponding period in 2007 due mainly to the positive currency effects mainly caused by depreciation of the Japanese yen against the Brazilian real, higher revenue, continuing cost reduction efforts, offsetting increased SG&A expenses.

Fiscal Year Results

Honda's consolidated net income for the fiscal year ended March 31, 2008 totaled JPY 600.0 million (USD 5,989 billion), an increase of 1.3% from the previous fiscal year. Basic net income per common share for the period amounted to JPY 330.54 (USD 3.30), an increase of JPY 5.92 over the JPY 324.62 for the previous fiscal year.

Consolidated revenue for the period amounted to JPY 12,002.8 billion (USD 119,801 million), an increase of 8.3% from the previous fiscal year. Consolidated operating income for the period totaled JPY 953.1 billion (USD 9,513 million), an increase of 11.9% compared to the previous fiscal year. This increase in operating income was due mainly to higher revenue, continuing cost reduction efforts and positive currency effects, which offset increased raw material costs and increased depreciation expenses, SG&A expenses and R&D expenses.

Consolidated income before income taxes, minority interest and equity in income of affiliates for the period totaled JPY 895.8 billion (USD 8,941 million), an increase of 13.0% from the previous fiscal year.

Equity in income of affiliates amounted to JPY 118.9 billion (USD 1,187 million) for the period, an increase of 15.0% from the previous fiscal year.

Revenue, operating income, income before income taxes, equity in income of affiliates and net income renewed record highs for the fiscal year.

Business Segment

With respect to Honda sales for the fiscal year by business segment, motorcycle unit sales totaled 9,320 thousand units, a decrease of 10.1% from the previous fiscal year. Unit sales in Japan totaled 311 thousand units, a decrease of 7.7%. Overseas unit sales was 9,009 thousand units, a decrease of 10.2% from the previous fiscal year, due mainly to decreased units sales of parts for local production at Honda's affiliates accounted for under the equity method in Asia, offsetting increased unit sales in other regions especially in Latin America. Revenue from external customers increased 13.7%, to JPY 1,558.6 billion (USD 15,557 million) from the same period in 2007, due mainly to increased revenue mainly in Asia and other regions and the positive impact of currency translation effects. Operating income increased by 50.4 % to JPY 151.2 billion (USD 1,510 million) from the previous fiscal year, due mainly to the positive currency effects caused by depreciation of the Japanese yen against Brazilian real and the favorable model mix, offsetting increased R&D expenses and SG&A expenses.

Honda's automobile unit sales was 3,925 thousand units, an increase of 7.5% from the previous fiscal year. In Japan, unit sales decreased 8.5% to 615 thousand units, while overseas unit sales increased 11.1% to 3,310 thousand units. Revenue from external customers increased 6.8% to JPY 9,489.3 billion (USD 94,714 million) from the previous fiscal year due to increased unit sales and the positive impact of currency translation effects. Operating income increased 10.4% to JPY 661.6 billion (USD 6,604 million) from the previous fiscal year.

Revenue from customers in financial services business increased 30.2% to JPY 533.5 billion (USD 5,325 million) from the previous fiscal year. Operating income increased 2.0% to JPY 117.7 billion (USD 1,176 million) from the previous fiscal year, due mainly to higher revenue, which offset increased SG&A expenses.

Honda's power products unit sales was 6,057 thousand units, down 5.7 % from the previous fiscal year. In Japan, unit sales totaled 550 thousand units, an increase of 4.4% from the previous fiscal year. Overseas unit sales decreased 6.6%, to 5,507 thousand units, due mainly to decreased unit sales in North America. Revenue from external customers in power product and other businesses increased by 0.8% to JPY 421.1 billion (USD 4,204 million) from the previous fiscal year. Operating income was JPY 22.3 billion (USD 223 million), a decrease of 38.2% from the previous fiscal year, due mainly to increased SG&A expenses and the increased R&D expenses in other businesses.

Geographical Information

With respect to Honda's sales for the fiscal year by geographical segment, in Japan, revenue for domestic and exports sales was JPY 4,889.0 billion (USD 48,798 million), up 2.4% compared to the previous fiscal year. Operating income was JPY 192.5 billion (USD 1,922 million), down 15.6% from the previous fiscal year, due primarily to increased R&D expenses, increased depreciation expenses and increased raw material costs, which more than offset the positive impact of continuing cost reduction efforts and higher revenue.

In North America, revenue increased by 1.5% to JPY 6,265.2 billion (USD 62,534 million) from the previous fiscal year, due mainly to increased sales in automobile business, offsetting the negative impact of the currency translation effects. Operating income decreased by 5.3% to JPY 432.6 billion (USD 4,318 million) from the previous fiscal year.

In Europe, revenue increased by 18.3% to JPY 1,594.2 billion (USD 15,912 million) compared to the previous fiscal year, due primarily to increased revenue in automobile business and the positive impact of the currency translation effects. Operating income increased by 61.1% to JPY 51.5 billion (USD 514 million) from the previous fiscal year, due primarily to higher revenue and continuing cost reduction efforts.

In Asia, revenue increased by 28.9% to JPY 1,638.2 billion (USD 16,352 million) from the previous fiscal year, due primarily to increased revenue in motorcycle business and automobile business. Operating income increased by 69.4% to JPY 130.7 billion (USD 1,305 million) from the previous fiscal year, due mainly to higher revenue and positive currency effects, offsetting increased SG&A expenses.

In other regions, revenue increased by 37.0% to JPY 1,092.8 billion (USD 10,907 million) compared to the previous fiscal year, due mainly to increased sales in automobile, motorcycle and power product businesses and the positive impact of the currency translation effects. Operating income increased by 61.2% to JPY 116.4 billion (USD 1,163 million) from the previous fiscal year, due primarily to higher sales, positive currency effects and continuing cost reduction efforts, more than offsetting increased SG&A expenses.

Forecasts for the Fiscal Year Ending March 31, 2009

In regard to the forecasts of the financial results for the fiscal year ending March 31, 2009, Honda projects consolidated and unconsolidated results to be as shown below:

FY2009 Forecasts for Consolidated Results First half ending September 30, 2008 Yen Changes from (billions) FY 2008 Net sales and other operating revenue 5,780 - 2.1% Operating income 300 - 40.9% Income before income taxes and equity in income of affiliates 320 - 34.5% Net income 230 - 38.6% Yen Basic net income per Common share 126.75 Fiscal year ending March 31, 2009 Yen Changes from (billions) FY 2008 Net sales and other operating revenue 12,140 + 1.1% Operating income 650 - 31.8% Income before income taxes and equity in income of affiliates 675 - 24.7% Net income 490 - 18.3% Yen Basic net income per Common share 270.04

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.

Profit Redistribution Policy and Dividend per Share of Common Stock for fiscal years 2008 and 2009

The Company strives to carry out its operations from a global perspective and to increase its corporate value. With respect to the redistribution of profits to our shareholders, which we consider to be one of the most important management issues, the Company's basic policy for dividends is to make distributions after taking into account its long-term consolidated earnings performance.

The Company will also acquire its own shares at the optimal timing with the goal of improving efficiency of the Company's capital structure. The present goal is to maintain a shareholders return ratio (i.e. the ratio of the total of the dividend payment and the repurchase of the Company's own shares to consolidated net income) of approximately 30%. Retained earnings will be allocated toward financing R&D activities that are essential for the future growth of the Company and capital expenditures and investment programs that will expand its operations for the purpose of improving business results and strengthening the Company's financial condition.

The Company plans to distribute year-end cash dividends of JPY 22 per share for the year ended March 31, 2008. As a result, total cash dividends for the year ended March 31, 2008, together with the first quarter cash dividends of JPY 20, the second quarter cash dividends of JPY 22 and the third quarter cash dividends of JPY 22, are planned to be JPY 86 per share, an increase of JPY 19 per share from the annual dividends paid for the year ended March 31, 2007.

Also, please note that the year-end cash dividends for the year ended March 31, 2008 are matters to be resolved at general meeting of shareholders.

The Company plans to distribute quarterly cash dividends of JPY 22 per share for each quarter for the year ending March 31, 2009. As a result, total cash dividends for the year ending March 31, 2009 are planned to be JPY 88 per share, an increase of JPY 2 from the annual dividends paid for the year ended March 31, 2008.