Honda Motor : FY2022 1st Quarter Condensed Consolidated Interim Financial Statements

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

June 30, 2021

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Financial Results

Overview of Operating Performance

While the global economy which had slowed down due to the spread of coronavirus disease 2019 (COVID-19) has continued to be on a recovery track, it has still continued to affect Honda's consolidated financial results for the three months ended June 30, 2021.

Resulting from travel restriction measures in certain countries or regions, the production activities of some of Honda's production bases were also affected mainly due to restrictions on employees' commute to the workplaces and delays in the supply of parts within the supply chain. Some dealers were obliged to suspend business, shorten business hours, or reduce services such as inspections and repairs. However, there is no significant impact on Honda's consolidated financial results for the three months ended June 30, 2021.

Honda's consolidated sales revenue for the three months ended June 30, 2021 increased by 68.7%, to ¥3,583.8 billion from the same period last year, due mainly to increased sales revenue in all business operations. Operating profit was ¥243.2 billion, an increase of ¥356.9 billion from the same period last year, due mainly to an increase in profit attributable to increased sales revenue and model mix. Profit before income taxes was ¥311.3 billion, an increase of ¥384.7 billion from the same period last year. Profit for the period attributable to owners of the parent was ¥222.5 billion, an increase of ¥303.3 billion from the same period last year.

Business Segments

Motorcycle Business

For the three months ended June 30, 2020 and 2021

							Units (thousands)
		Honda Group Unit Sales*					Consolidated Unit Sales*
	Three months	Three months					Three months	Three months
	ended		ended					ended		ended
	Jun. 30, 2020		Jun. 30, 2021		Change		%		Jun. 30, 2020		Jun. 30, 2021	Change	%
Motorcycle Business	1,855		3,879	2,024	109.1	1,221	2,392	1,171	95.9
Japan	50	59	9	18.0	50	59	9	18.0
North America	61	101	40	65.6	61	101	40	65.6
Europe	61	108	47	77.0	61	108	47	77.0
Asia	1,572	3,245	1,673	106.4	938	1,758	820	87.4
Other Regions	111	366	255	229.7	111	366	255	229.7

• Honda Group Unit Sales is the total unit sales of completed motorcycle, ATV and side-by-side products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries.

Sales revenue from external customers increased by 89.0%, to ¥518.2 billion from the same period last year, due mainly to increased consolidated unit sales. Operating profit increased by 620.4%, to ¥80.6 billion from the same period last year, due mainly to an increase in profit attributable to increased sales volume and model mix.

Automobile Business

For the three months ended June 30, 2020 and 2021

								Units (thousands)
			Honda Group Unit Sales*				Consolidated Unit Sales*
	Three months		Three months						Three months	Three months
		ended		ended						ended		ended
		Jun. 30, 2020		Jun. 30, 2021	Change	%		Jun. 30, 2020		Jun. 30, 2021	Change	%
Automobile Business		792	998	206	26.0	337	608		271	80.4
Japan	129	133	4	3.1	113	118	5	4.4
North America	159	346	187	117.6	159	346		187	117.6
Europe	16	28	12	75.0	16	28		12	75.0
Asia	473	462	(11)	(2.3)	34	87		53	155.9
Other Regions	15	29	14	93.3	15	29		14	93.3

• Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. Certain sales of automobiles that are financed with residual value type auto loans by our Japanese finance subsidiaries and sold through our consolidated subsidiaries are accounted for as operating leases in conformity with IFRS and are not included in consolidated sales revenue to the external customers in our Automobile business. Accordingly, they are not included in Consolidated Unit Sales, but are included in Honda Group Unit Sales of our Automobile business.

Sales revenue from external customers increased by 82.4%, to ¥2,206.4 billion from the same period last year, due mainly to increased consolidated unit sales. Operating profit was ¥70.6 billion, an increase of ¥266.5 billion from the same period last year, due mainly to an increase in profit attributable to increased sales volume and model mix.

Financial Services Business

Sales revenue from external customers increased by 33.1%, to ¥766.5 billion from the same period last year, due mainly to increased revenues on disposition of lease vehicles. Operating profit increased by 28.9%, to ¥92.2 billion from the same period last year, due mainly to an increase in profit attributable to increased sales revenue.

Life Creation and Other Businesses

For the three months ended June 30, 2020 and 2021

			Units (thousands)
	Honda Group Unit Sales / Consolidated Unit Sales*
	Three months		Three months
	ended		ended
	Jun. 30, 2020		Jun. 30, 2021		Change		%
Life Creation Business	1,083	1,708		625		57.7
Japan	80	87		7		8.8
North America	524	880		356		67.9
Europe	170	279		109		64.1
Asia	257	362		105		40.9
Other Regions	52	100		48		92.3

• Honda Group Unit Sales is the total unit sales of completed power products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed power products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed power products of Honda and its consolidated subsidiaries. In Life creation business, there is no discrepancy between Honda Group Unit Sales and Consolidated Unit Sales since no affiliate and joint venture accounted for using the equity method were involved in the sale of Honda power products.

Sales revenue from external customers increased by 45.2%, to ¥92.6 billion from the same period last year, due mainly to increased consolidated unit sales in Life creation business. Operating loss was ¥0.3 billion, an improvement of ¥0.1 billion from the same period last year, due mainly to an increase in profit attributable to increased sales volume and model mix, which was partially offset by increased operating costs in Other businesses. In addition, operating loss of aircraft and aircraft engines included in the Life creation and other businesses was ¥8.3 billion, an increase of ¥1.1 billion from the same period last year.

Cash Flows

Consolidated cash and cash equivalents on June 30, 2021 decreased by ¥254.5 billion from March 31, 2021, to ¥2,503.4 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 provided by operating activities amounted to ¥7.2 billion of cash inflows. Cash inflows from operating activities increased by

¥79.0 billion from the same period last year, due mainly to increased cash received from customers, which was partially offset by increased payments for parts and raw materials.

Net cash used in investing activities amounted to ¥128.7 billion of cash outflows. Cash outflows from investing activities increased by

¥19.3 billion from the same period last year, due mainly to increased payments for acquisitions of other financial assets, which was partially offset by decreased payments for additions to and internally developed intangible assets.

Net cash used in financing activities amounted to ¥140.8 billion of cash outflows. Cash outflows from financing activities increased by ¥252.8 billion from the same period last year, due mainly to decreased proceeds from financing liabilities and increased dividends paid.

Changes in Major Consolidated Subsidiaries

Changes in major consolidated subsidiaries for the three months ended June 30, 2021 are as follows:

Motorcycle Business, Automobile Business, Life Creation and Other Businesses

American Honda Motor Co., Inc. integrated certain functions of Honda R&D Americas, Inc.

Automobile Business

Honda of America Mfg., Inc. merged with Honda Manufacturing of Alabama, LLC, Honda Manufacturing of Indiana, LLC, Honda Transmission Mfg. of America, Inc., Honda R&D Americas, Inc. and three other companies and changed its name to "Honda Development and Manufacturing of America, LLC".

Research and Development

The changes in research and development activities by Honda and its subsidiaries for the three months ended June 30, 2021 are as follows:

American Honda Motor Co., Inc., our consolidated subsidiaries in the United States, made organizational changes to its automobile manufacturing-related companies and automobile development function in the United States on April 1, 2021. As a result of these changes, Honda R&D Americas, Inc. and Honda Engineering North America, Inc. were merged into Honda Development and Manufacturing of America, LLC. Additionally, in the motorcycle operations, Honda of South Carolina Mfg., Inc., which is responsible for manufacturing powersports products (PSPs), including ATV and side-by-side products, and the PSPs development function of Honda R&D Americas, Inc. were merged into the PSPs division of American Honda Motor Co., Inc. These organizational changes will advance integrated operations in all areas of sales, manufacturing, development and procurement, and strengthen our business structure in North America to respond more quickly to the needs of our customers and the market in light of the rapidly changing market environment.

Unit Production and Sales

Unit production and sales in Honda and its subsidiaries for the three months ended June 30, 2021 in Motorcycle business, Automobile business and Life creation business increased significantly from the same period last year. The increased unit production in each segment was due to suspended or reduced production in Honda's production bases in Japan and overseas resulted from the spread of COVID-19 in the same period last year. For the increased unit sales in each segment, see "Business Segment" in "Consolidated Financial Results".

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Position

March 31, 2021 and June 30, 2021

			Yen (millions)
			March 31,			June 30,
Assets	Note		2021				2021
			unaudited			unaudited
Current assets:
Cash and cash equivalents	¥	2,758,020	¥	2,503,454
Trade receivables			801,814			703,623
Receivables from financial services			1,794,654			1,672,560
Other financial assets			295,307			274,957
Inventories			1,545,600			1,736,099
Other current assets			383,696			379,036
Total current assets			7,579,091			7,269,729
Non-current assets:
Investments accounted for using the equity method			891,002			960,595
Receivables from financial services			3,619,896			3,734,419
Other financial assets			628,533			733,355
Equipment on operating leases	5		4,919,916			5,018,034
Property, plant and equipment	6		3,021,514			2,987,702
Intangible assets			818,763			819,488
Deferred tax assets			99,552			108,540
Other non-current assets			342,763			350,974
Total non-current assets			14,341,939			14,713,107
Total assets		¥	21,921,030	¥	21,982,836
			Yen (millions)
			March 31,			June 30,
Liabilities and Equity	Note		2021				2021
			unaudited			unaudited
Current liabilities:
Trade payables	¥	1,088,061	¥	1,021,390
Financing liabilities			3,005,624			3,266,072
Accrued expenses			415,106			337,264
Other financial liabilities			182,145			171,109
Income taxes payable			47,793			52,845
Provisions	7		362,151			323,286
Other current liabilities			614,577			587,405
Total current liabilities			5,715,457			5,759,371
Non-current liabilities:
Financing liabilities			4,715,361			4,453,295
Other financial liabilities			280,809			277,594
Retirement benefit liabilities			358,532			366,488
Provisions	7		278,890			273,102
Deferred tax liabilities			842,001			883,949
Other non-current liabilities			357,141			364,818
Total non-current liabilities			6,832,734			6,619,246
Total liabilities			12,548,191			12,378,617
Equity:
Common stock			86,067			86,067
Capital surplus			172,049			171,751
Treasury stock			(273,786)			(273,396)
Retained earnings			8,901,266			9,030,414
Other components of equity			196,710			310,562
Equity attributable to owners of the parent			9,082,306			9,325,398
Non-controlling interests			290,533			278,821
Total equity			9,372,839			9,604,219
Total liabilities and equity		¥	21,921,030	¥	21,982,836

See accompanying notes to condensed consolidated interim financial statements.