Honda Motor : FY2021 1st Quarter Financial Results Press Releases

August 5, 2020

HONDA MOTOR CO., LTD. REPORTS

CONSOLIDATED FINANCIAL RESULTS

FOR THE FISCAL FIRST QUARTER

ENDED JUNE 30, 2020

Tokyo, August 5, 2020--- Honda Motor Co., Ltd. today announced its consolidated financial results for the fiscal first quarter ended June 30, 2020.

First Quarter Results

The spread of coronavirus disease 2019 (COVID-19) has caused the global economic slowdown and also has affected Honda's consolidated financial results for the three months ended June 30, 2020.

Resulting from travel restriction measures by government, Honda's production bases in Japan and overseas were also affected by suspended or reduced production mainly due to restrictions on employees' commute to the workplaces and delays in the supply of parts within the supply chain. Some dealers in Japan and overseas were obliged to suspend business, shorten business hours, or reduce services such as inspections and repairs.

Honda's consolidated sales revenue for the three months ended June 30, 2020 decreased by 46.9%, to JPY 2,123.7 billion from the same period last year, due mainly to decreased sales revenue in all business operations. Operating loss was JPY 113.6 billion, a decrease of JPY 366.1 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sales revenue and model mix, which was partially offset by decreased selling, general and administrative expenses. Loss before income taxes was JPY 73.4 billion, a decrease of JPY 363.2 billion from the same period last year. Loss for the period attributable to owners of the parent was JPY 80.8 billion, a decrease of JPY 253.1 billion from the same period last year.

Loss per share attributable to owners of the parent for the period amounted to JPY 46.84, a decrease of JPY 144.76 from the corresponding period last year. One Honda American Depository Share represents one common share.

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Consolidated Statements of Financial Position for the Fiscal First Quarter Ended June 30, 2020

Total assets decreased by JPY 349.7 billion, to JPY 20,111.7 billion from March 31, 2020 due mainly to a decrease in receivables from financial services, cash and cash equivalents as well as property, plant and equipment, despite an increase in inventories. Total liabilities decreased by JPY 200.6 billion, to JPY 11,974.8 billion from March 31, 2020 due mainly to a decrease in trade payables, accrued expenses as well as deferred tax liabilities, despite increased financing liabilities. Total equity decreased by JPY 149.1 billion, to JPY 8,136.9 billion from March 31, 2020 due mainly to a decrease in retained earnings attributable to loss for the period.

Consolidated Statements of Cash Flows for the Fiscal First Quarter Ended June 30, 2020

Consolidated cash and cash equivalents on June 30, 2020 decreased by JPY 64.5 billion from March 31, 2020, to JPY 2,607.7 billion. The reasons for the increases or decreases for each cash flow activity, when compared with the same period last year, are as follows:

Net cash used in operating activities amounted to JPY 71.7 billion of cash outflows. Cash outflows from operating activities increased by JPY 267.3 billion from the same period last year, due mainly to a decrease in cash received from customers, despite decreased payments for parts and raw materials.

Net cash used in investing activities amounted to JPY 109.3 billion of cash outflows. Cash outflows from investing activities decreased by JPY 58.8 billion from the same period last year, due mainly to decreased payments for acquisitions of other financial assets as well as decreased payments for additions to property, plant and equipment.

Net cash provided by financing activities amounted to JPY 111.9 billion of cash inflows. Cash inflows from financing activities increased by JPY 195.7 billion from the same period last year, due mainly to increased proceeds from financing liabilities.

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Forecasts for the Fiscal Year Ending March 31, 2021

Honda was unable to provide a reasonably calculated forecast of the consolidated financial results for the fiscal year ending March 31, 2021, due to impacts relating to the spread of COVID-19. However, based on various factors such as recent environment and trends in Honda's financial results, Honda projects consolidated results for the fiscal year ending March 31, 2021 to be as shown below:

Fiscal year ending March 31, 2021	Yen (billions)	Changes from FY 2020
Sales revenue	12,800.0	-14.3%
Operating profit	200.0	-68.4%
Profit before income taxes	365.0	-53.8%
Profit for the year	195.0	-61.8%
Profit for the year attributable to owners of the parent	165.0	-63.8%
	Yen
Earnings per share attributable to owners of the parent
Basic and diluted	95.56

Note: The forecasts are based on the assumption that the average exchange rates for the Japanese yen to the U.S. dollar

will be JPY 106 for the full year ending March 31, 2021.

The reasons for the increases or decreases in the forecasts of the operating profit, and profit before income taxes for the fiscal year ending March 31, 2021 from the previous year are as follows.

	Yen (billions)
Revenue, model mix, etc.	- 461.6
Cost reduction, the effect of raw material cost fluctuations, etc.	+ 51.0
SG&A expenses	+ 104.0
R&D expenses	- 47.0
Currency effect	- 80.0
Operating profit compared with fiscal year ended March 31, 2020	- 433.6
Share of profit of investments accounted for using the equity method	+ 0.7
Finance income and finance costs	+ 7.9
Profit before income taxes compared with fiscal year ended March 31, 2020	- 424.9

Dividend per Share of Common Stock

The dividend forecast for the fiscal year ending March 31, 2021 was undetermined, as Honda was unable to provide a reasonably calculated forecast of the consolidated financial results for the fiscal year ending March 31, 2021, due to impacts relating to the spread of COVID-19. However, based on the forecast of the consolidated financial results for the fiscal year ending March 31, 2021 as shown above, Honda hereby provides the dividend forecast for the fiscal year ending March 31, 2021, as below.

Fiscal first quarter dividend is JPY 11 per share of common stock.

The Company expects to distribute quarterly cash dividends of JPY 11 per share for each quarter for the fiscal year ending March 31, 2021. As a result, total cash dividends for the fiscal year ending March 31, 2021 are expected to be JPY 44 per share.

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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 the actual results of the Company could differ materially from those described in these forward-looking statements as a result of numerous factors, including general economic conditions in the principal markets of the Company, its consolidated subsidiaries and its affiliates accounted for by the equity-method, and fluctuation of foreign exchange rates, as well as other factors detailed from time to time. The various factors for increases and decreases in profit have been classified in accordance with a method that Honda considers reasonable.

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1. Condensed Consolidated Statements of Financial Position
   March 31, 2020 and June 30, 2020

	Yen (millions)
	Mar. 31, 2020	Jun. 30, 2020
Assets
Current assets:
Cash and cash equivalents	2,672,353		2,607,760
Trade receivables	633,909		609,222
Receivables from financial services	1,878,358		1,684,860
Other financial assets	190,053		176,902
Inventories	1,560,568		1,651,700
Other current assets	365,769		334,919
Total current assets	7,301,010		7,065,363
Non-current assets:
Investments accounted for using the equity method	655,475		675,141
Receivables from financial services	3,282,807		3,262,447
Other financial assets	441,724		469,325
Equipment on operating leases	4,626,063		4,587,433
Property, plant and equipment	3,051,704		2,991,499
Intangible assets	760,434		772,428
Deferred tax assets	132,553		87,384
Other non-current assets	209,695		200,714
Total non-current assets	13,160,455		13,046,371
Total assets	20,461,465		20,111,734
Liabilities and Equity
Current liabilities:
Trade payables	958,469		781,767
Financing liabilities	3,248,457		3,334,751
Accrued expenses	449,716		372,092
Other financial liabilities	209,065		221,456
Income taxes payable	43,759		41,489
Provisions	287,175		267,787
Other current liabilities	593,447		530,972
Total current liabilities	5,790,088		5,550,314
Non-current liabilities:
Financing liabilities	4,221,229		4,308,804
Other financial liabilities	303,570		302,042
Retirement benefit liabilities	578,909		588,867
Provisions	238,439		245,811
Deferred tax liabilities	698,868		638,493
Other non-current liabilities	344,339		340,495
Total non-current liabilities	6,385,354		6,424,512
Total liabilities	12,175,442		11,974,826
Equity:
Common stock	86,067		86,067
Capital surplus	171,823		171,811
Treasury stock	(273,940)	(273,817)
Retained earnings	8,142,948		8,013,714
Other components of equity	(114,639)	(113,535)
Equity attributable to owners of the parent	8,012,259		7,884,240
Non-controlling interests	273,764		252,668
Total equity	8,286,023		8,136,908
Total liabilities and equity	20,461,465		20,111,734

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1. Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Income

For the three months ended June 30, 2019 and 2020

	Yen (millions)
	Three months	Three months
	ended	ended
	Jun. 30, 2019			Jun. 30, 2020
Sales revenue	3,996,253			2,123,775
Operating costs and expenses:
Cost of sales	(3,166,483)			(1,769,299)
Selling, general and administrative	(407,449)			(305,253)
Research and development	(169,852)			(162,914)
Total operating costs and expenses	(3,743,784)			(2,237,466)
Operating profit (loss)	252,469			(113,691)
Share of profit of investments accounted for using the equity method	44,230			39,994
Finance income and finance costs:
Interest income	14,195			4,595
Interest expense	(3,595)			(1,833)
Other, net	(17,488)			(2,498)
Total finance income and finance costs	(6,888)			264
Profit (loss) before income taxes	289,811			(73,433)
Income tax expense	(100,219)			(6,546)
Profit (loss) for the period	189,592			(79,979)
Profit (loss) for the period attributable to:
Owners of the parent	172,302			(80,871)
Non-controlling interests	17,290			892
	Yen
Earnings (loss) per share attributable to owners of the parent
Basic and diluted	97.92			(46.84)

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Condensed Consolidated Statements of Comprehensive Income

For the three months ended June 30, 2019 and 2020

	Yen (millions)
	Three months	Three months
	ended	ended
	Jun. 30, 2019		Jun. 30, 2020
Profit (loss) for the period	189,592		(79,979)
Other comprehensive income, net of tax:
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans	－	－
Net changes in revaluation of financial assets measured at fair value			4,209
through other comprehensive income	(6,348)
Share of other comprehensive income of investments accounted for			529
using the equity method	(825)
Items that may be reclassified subsequently to profit or loss
Net changes in revaluation of financial assets measured at fair value	110		56
through other comprehensive income
		8,819
Exchange differences on translating foreign operations	(129,218)
Share of other comprehensive income of investments accounted for			(5,193)
using the equity method	(14,259)
Total other comprehensive income, net of tax	(150,540)		8,420
Comprehensive income for the period	39,052		(71,559)
Comprehensive income for the period attributable to:
Owners of the parent	28,277		(79,767)
Non-controlling interests	10,775		8,208

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[3] Condensed Consolidated Statements of Changes in Equity

For the three months ended June 30, 2019

							Yen (millions)
			Equity attributable to owners of the parent
									Other			Non-controlling	Total
	Common		Capital		Treasury	Retained	components
	stock		surplus		stock		earnings	of equity		Total	interests	equity
Balance as of April 1, 2019	86,067	171,460	(177,827)	7,973,637		214,383		8,267,720		298,070		8,565,790
Comprehensive income for the period
Profit (loss) for the period							172,302				172,302		17,290		189,592
Other comprehensive income,
net of tax									(144,025)	(144,025)	(6,515)	(150,540)
Total comprehensive income
for the period							172,302		(144,025)	28,277		10,775		39,052
Reclassification to retained earnings							(2)	2		－			－
Transactions with owners and other
Dividends paid							(49,287)			(49,287)	(44,226)	(93,513)
Purchases of treasury stock				(3)					(3)			(3)
Disposal of treasury stock				79						79				79
Share-based payment transactions		78								78				78
Total transactions with
owners and other		78	76		(49,287)			(49,133)	(44,226)	(93,359)
Other changes							176				176				176
Balance as of June 30, 2019	86,067		171,538		(177,751)	8,096,826		70,360		8,247,040		264,619		8,511,659

For the three months ended June 30, 2020

							Yen (millions)
			Equity attributable to owners of the parent
									Other			Non-controlling	Total
	Common	Capital	Treasury	Retained	components
	stock		surplus	stock		earnings	of equity		Total	interests	equity
Balance as of April 1, 2020	86,067		171,823	(273,940)	8,142,948	(114,639)	8,012,259	273,764	8,286,023
Comprehensive income for the period
Profit (loss) for the period							(80,871)			(80,871)	892	(79,979)
Other comprehensive income,									1,104	1,104	7,316	8,420
net of tax
Total comprehensive income
						(80,871)	1,104	(79,767)	8,208	(71,559)
for the period
Transactions with owners and other
Dividends paid							(48,363)			(48,363)	(31,555)	(79,918)
Purchases of treasury stock					(1)					(1)			(1)
Disposal of treasury stock					124					124			124
Share-based payment transactions			(12)							(12)			(12)
Equity transactions and others													2,251	2,251
Total transactions with
		(12)	123	(48,363)			(48,252)	(29,304)	(77,556)
owners and other
Balance as of June 30, 2020	86,067		171,811	(273,817)	8,013,714	(113,535)	7,884,240	252,668	8,136,908

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[4] Condensed Consolidated Statements of Cash Flows

For the three months ended June 30, 2019 and 2020

	Yen (millions)
	Three months	Three months
	ended	ended
Cash flows from operating activities:	Jun. 30, 2019	Jun. 30, 2020
Profit (loss) before income taxes	289,811		(73,433)
Depreciation, amortization and impairment losses excluding equipment on			149,419
operating leases	170,016
Share of profit of investments accounted for using the equity method	(44,230)		(39,994)
Finance income and finance costs, net	(9,127)		6,752
Interest income and interest costs from financial services, net	(32,344)		(28,354)
Changes in assets and liabilities
Trade receivables	9,919		33,546
Inventories	(12,930)		(91,946)
Trade payables	(53,045)		(134,776)
Accrued expenses	(34,712)		(87,180)
Provisions and retirement benefit liabilities	10,907		9,395
Receivables from financial services	6,582		199,194
Equipment on operating leases	(53,086)		16,833
Other assets and liabilities	(83,469)		(35,335)
Other, net	1,866		(2,402)
Dividends received	26,632		5,468
Interest received	73,532		58,567
Interest paid	(32,873)		(27,577)
Income taxes paid, net of refunds	(37,861)		(29,945)
Net cash provided by (used in) operating activities	195,588		(71,768)
Cash flows from investing activities:
Payments for additions to property, plant and equipment	(97,415)		(84,090)
Payments for additions to and internally developed intangible assets	(58,172)		(50,151)
Proceeds from sales of property, plant and equipment and intangible assets	7,885		3,231
Payments for acquisitions of subsidiaries, net of cash and cash			2,230
equivalents acquired	－
Payments for acquisitions of investments accounted for using the equity method	(2,401)		－
Payments for acquisitions of other financial assets	(60,055)		(38,460)
Proceeds from sales and redemptions of other financial assets	42,018		57,920
Net cash used in investing activities	(168,140)		(109,320)
Cash flows from financing activities:
Proceeds from short-term financing liabilities	2,049,304		2,847,881
Repayments of short-term financing liabilities	(2,318,708)		(2,687,827)
Proceeds from long-term financing liabilities	494,872		405,004
Repayments of long-term financing liabilities	(219,727)		(376,788)
Dividends paid to owners of the parent	(49,287)		(48,363)
Dividends paid to non-controlling interests	(22,967)		(9,282)
Purchases and sales of treasury stock, net	76		123
Repayments of lease liabilities	(17,400)		(18,291)
Other, net	2		(555)
Net cash provided by (used in) financing activities	(83,835)		111,902
Effect of exchange rate changes on cash and cash equivalents	(46,546)		4,593
Net change in cash and cash equivalents	(102,933)		(64,593)
Cash and cash equivalents at beginning of year	2,494,121		2,672,353
Cash and cash equivalents at end of period	2,391,188		2,607,760

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[5] Assumptions for Going Concern

None

1. Notes to Consolidated Financial Statements [A] Segment Information

Honda has four reportable segments: Motorcycle business, Automobile business, Financial services business and Life creation and other businesses, which are based on Honda's organizational structure and characteristics of products and services. Operating segments are defined as the components of Honda for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The accounting policies used for these reportable segments are consistent with the accounting policies used in the Company's condensed consolidated interim financial statements.

Principal products and services, and functions of each segment are as follows:

Segment		Principal products and services		Functions
Motorcycle Business		Motorcycles, all-terrain vehicles (ATVs),		Research and development
		side-by-sides (SxS) and relevant parts		Manufacturing
				Sales and related services
Automobile Business		Automobiles and relevant parts		Research and development
				Manufacturing
				Sales and related services
Financial Services Business		Financial services		Retail loan and lease related to Honda products
				Others
Life Creation and Other		Power products and relevant parts,		Research and development
Businesses		and others		Manufacturing
				Sales and related services
				Others

Segment information based on products and services

As of and for the three months ended June 30, 2019

							Yen (millions)
					Financial		Life Creation
	Motorcycle		Automobile		Services		and Other	Segment		Reconciling
	Business		Business		Business		Businesses	Total		Items	Consolidated
Sales revenue:
External customers	533,018	2,694,478	688,401	80,356			3,996,253		－	3,996,253
Intersegment	－		55,662		3,624		4,888			64,174		(64,174)	－
Total	533,018		2,750,140		692,025		85,244			4,060,427		(64,174)	3,996,253
Segment profit (loss)	69,873		120,375		65,782		(3,561)		252,469		－	252,469
Segment assets	1,500,514	8,104,744	10,076,682	338,134			20,020,074	286,628		20,306,702
Depreciation and amortization	17,072	146,891	206,866	3,579			374,408		－	374,408
Capital expenditures	13,552	101,076	576,451	3,058			694,137		－	694,137

As of and for the three months ended June 30, 2020

							Yen (millions)
					Financial	Life Creation
	Motorcycle	Automobile	Services	and Other	Segment	Reconciling
	Business	Business	Business	Businesses	Total	Items	Consolidated
Sales revenue:
External customers	274,222		1,209,923	575,834	63,796		2,123,775	－	2,123,775
Intersegment	－		45,800	3,168	4,441		53,409	(53,409)	－
Total	274,222		1,255,723	579,002	68,237		2,177,184	(53,409)	2,123,775
Segment profit (loss)	11,202		(195,888)	71,568	(573)		(113,691)	－	(113,691)
Segment assets	1,386,342		7,641,611	10,202,227	352,249		19,582,429	529,305	20,111,734
Depreciation and amortization	16,775		126,793	206,150	3,888		353,606	－	353,606
Capital expenditures	8,550		89,371	396,701	2,082		496,704	－	496,704

Explanatory notes:

1. Intersegment sales revenues are generally made at values that approximate arm's-length prices.

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2. Reconciling items include elimination of intersegment transactions and balances as well as unallocated corporate assets. Unallocated corporate assets, included in reconciling items as of June 30, 2019 and 2020 amounted to JPY 551,689 million and JPY 820,941 million, respectively, which consist primarily of the Company's cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

In addition to the disclosure required by IFRS, Honda provides the following supplemental information for the

financial statements users:

Supplemental geographical information based on the location of the Company and its subsidiaries

As of and for the three months ended June 30, 2019

Yen (millions)

			North						Other				Reconciling
	Japan		America		Europe		Asia		Regions		Total		Items	Consolidated
Sales revenue:
External customers	594,300	2,213,126	155,392	844,102	189,333	3,996,253		－	3,996,253
Inter-geographic
areas	556,455		102,919		50,838		175,163		1,943		887,318		(887,318)	－
Total	1,150,755		2,316,045		206,230		1,019,265		191,276		4,883,571		(887,318)	3,996,253
Operating profit (loss)	36,672		102,701		2,600		97,961		8,479		248,413		4,056		252,469
Assets	4,766,236	11,200,662	639,831	3,043,833	619,899	20,270,461	36,241		20,306,702
Non-current assets
other than financial
instruments, deferred
tax assets and net	2,922,170	4,653,618	94,351	673,137	142,292	8,485,568		－	8,485,568
defined benefit assets

As of and for the three months ended June 30, 2020

Yen (millions)

				North					Other			Reconciling
		Japan	America	Europe	Asia	Regions	Total	Items	Consolidated
Sales revenue:
External customers	471,450		1,061,689	90,628	444,317	55,691	2,123,775	－	2,123,775
Inter-geographic		295,730		78,816	14,109	89,674	524	478,853	(478,853)
areas		－
Total		767,180		1,140,505	104,737	533,991	56,215	2,602,628	(478,853)	2,123,775
Operating profit (loss)		(61,934)	(77,886)	4,854	23,303	(5,576)	(117,239)	3,548	(113,691)
Assets		4,712,594		11,123,120	682,541	2,799,058	473,595	19,790,908	320,826	20,111,734
Non-current assets
other than financial
instruments, deferred
tax assets and net	2,991,617		4,672,911	57,515	661,518	106,492	8,490,053	－	8,490,053
defined benefit assets
Explanatory notes:
1. Major countries in each geographic area:
North America	United States, Canada, Mexico
Europe	United Kingdom, Germany, Belgium, Italy, France
Asia	Thailand, Indonesia, China, India, Vietnam
Other Regions	Brazil, Australia

1. Sales revenues between geographic areas are generally made at values that approximate arm's-length prices.
2. Reconciling items include elimination of inter-geographic transactions and balances as well as unallocated corporate assets. Unallocated corporate assets, included in reconciling items as of June 30, 2019 and 2020 amounted to JPY 551,689 million and JPY 820,941 million, respectively, which consist primarily of the Company's cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

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[B] Other

Loss related to airbag inflators

Honda has been conducting market-based measures in relation to airbag inflators. Honda recognizes a provision for specific warranty costs when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. There is a possibility that Honda will need to recognize additional provisions when new evidence related to the product recalls arise, however, it is not possible for Honda to reasonably estimate the amount and timing of potential future losses as of the date of this report.

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