HONDA MOTOR CO LTD Q1 FY2024 earnings call

• In Q1 FY2024, improved fixed cost structure led to significant growth in automobile operating profit, with operating profit up ¥172.2 billion year-on-year to ¥394.4 billion. • Automobile business in US saw improved semiconductor supply, production recovery, and strong sales of new models, while China's new energy vehicle market competition impacted results. • Motorcycle business had lower units in India and Vietnam but stable in Indonesia. • Electrification efforts include partnership with SCSK Corporation and joint venture with seven automakers for EV charging network in North America. • Announced launch of personal use electric motorcycle EM1e in Japan. • Board approved a stock split, with annual dividend forecast unchanged.

In Q1 FY2024, automobile operating profit saw significant year-on-year growth, with operating profit reaching ¥394.4 billion, a quarterly record, and operating margin at 8.5%. The motorcycle business had unit sales lower in India and Vietnam but stable in Indonesia. Operating profit for motorcycle business was ¥143.5 billion, automotive business was ¥176.9 billion, financial services was ¥69.5 billion, and power products and other businesses was ¥4.4 billion. Sales revenue and operating profit varied by business segment, with automobile and motorcycle sales units contributing to the overall results.

• Fiscal 2024 forecast remains unchanged. • Operating profit annual target is ¥1 trillion, with progress at ¥390 billion. • Automobile business focusing on fixed cost reduction and new model introductions, aiming to increase profitability. • Motorcycle business targeting ROS around 15% and aiming to offset declines in some markets with growth in others.

• Competition in China's new energy vehicle market impacted results. • Volatile markets in motorcycle business, such as challenges in Vietnam and India. • Potential impact of economic slowdowns in certain regions on sales and profitability.

Q: How much better was operating profit compared to internal forecast and why was the FY '24 forecast unchanged?

A: Operating profit exceeded internal expectations. The full year forecast remained unchanged as Q1 results were in line with targets, and China and Vietnam challenges were offsettable on a global basis.

Q: Comment on sales price and costs for motorcycle and automobile business?

A: Sales price and costs were in line with expectations. For automobile, decreasing material costs and metal prices, and for motorcycle, production volume recovery contributed to positive effects.

Q: Thoughts on sustainability of fixed cost structure and free cash flows?

A: Fixed cost reductions in Japan were due to foreign exchange and loyalty royalties. Free cash flow was ¥290 billion in Q1, with annual target around ¥700 billion, expecting inventory decline to contribute to free cash flow.

Q: Breakdown of automobile sales unit increase and demand forecast for North America?

A: North America saw a 130,000 unit increase in sales. Demand in North America is strong with new models, but concerns about recessions and used car market impact exist.

Q: Battery strategy and progress?

A: Honda is developing batteries with various technologies, including all solid state, and has partnerships with LG and GS Yuasa for production and recycling, with plans for commercialization by 2025-2029.