Honda Motor Co., Ltd. Q3 FY2025 earnings call

• Key financial results: FY 2025 third quarter cumulative operating profit was 1,139.9 billion yen with an operating profit margin of 7%. Operating cash flow after R&D adjustment was 1,945 billion yen. - Segment updates: Motorcycle sales strong globally with upward revision to record high unit sales; automobile sales decreased year on year mainly due to China market drop; power products sales affected by Europe market decline. - Share repurchase: Resolution to repurchase 1.1 trillion yen worth of company shares, with 184.9 billion yen acquired as of January 31, 2025. - Market situation: Motorcycle operations benefited from strong demand in India, Brazil, and Vietnam; automobile business saw increases in Japan and US but declined in China due to severe market environment.

For the motorcycle segment, cumulative unit sales until the third quarter of FY March 2025 were 15,508,000 units with an operating profit of 501.6 billion yen. The automobile segment had cumulative unit sales of 2,817,000 units and an operating profit of 402.6 billion yen. The power products segment had cumulative unit sales of 2,516,000 units and made a loss of 9.3 billion yen. The financial service businesses had an operating profit of 244.9 billion yen.

• Maintained consolidated financial forecasts: Operating profit at 1,420 billion yen and profit attributable to owners of the parent company at 950 billion yen. - Motorcycle unit sales revised upward to a record high. - Automobile operations revised downward to 3.75 million units. - Exchange rate assumption: 152 yen against the dollar for the fourth quarter and full year. - Annual dividend remains at 68 yen unchanged. - Share repurchase plan: Aim to complete repurchase of 1.1 trillion yen in shares.

• Market conditions in China impacting automobile sales volume. - Tariff uncertainties in North America potentially affecting automobile business operations. - Challenges in the Thai motorcycle market, such as difficulty in financing leading to low sales, which may have an impact on related automotive sectors.

Q: About the full year four-quarters plan, reason for decline in fourth quarter operating profit and risks/opportunities.

A: Fourth quarter tends to have higher SGA and R&D expenses. Risks include possible negative factors in fourth quarter related to EV incentives and supply adjustments. Opportunities include motorcycle business offsetting automotive business impact.

Q: Impact of North American EV incentives and procurement costs.

A: North American EV incentives have slightly increased, procurement costs are slightly higher, but overall a marginal increase. EV incentives impact was initially expected at 100 billion yen but has slightly declined.

Q: Measures to improve automobile business profitability and impact of Trump administration tariffs.

A: For automobile profitability, hybrid and gasoline-based engine cars have improved profitability, with next-gen hybrids expected to further boost. Regarding tariffs, short-term actions include reallocating production mix, mid-term and long-term involve changing production allocation, but no specific actions decided yet.

Q: Impact of Thai motorcycle sales decline on automobile business and reason for continuing share repurchase.

A: Thai motorcycle sales decline due to financing difficulties, impact on automobile business related to financing and loan securing. Share repurchase continues to optimize equity ratio, aiming for one-month level of cash at hand and target PBR of one fold.

Q: Concept for operating profit of motorcycle and automobile businesses, electrification progress.

A: Motorcycle electrification has lower investment compared to automobiles, with growth potential in certain markets. Automobile gasoline-based and hybrid businesses have 8% profitability, next-gen hybrids expected to boost profitability. Battery EVs have unclear visibility due to policy uncertainties.

Q: Recovery in China market and capex changes.

A: In China, preparing to launch ES series models, NEV ratio increasing. Capex decline of 70 billion yen is due to changing timing of investments, with battery EV-related investments in Canada having changed timing.

Q: U.S. market automobile situation, ZEV regulation, and Southeast Asian hybrid plans.

A: U.S. market faces uncertainties with Trump administration, ZEV regulation is challenging. Hybrid sales expected to increase, with 400,000 hybrids sold in FY 2025 and 500,000+ expected next year. In Southeast Asia, increasing hybrid engagement planned for markets like Thailand and Indonesia.