Honda Motor : FY2022 3rd Quarter Condensed Consolidated Interim Financial Statements

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

December 31, 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 nine months ended December 31, 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 nine months ended December 31, 2021.

Honda's consolidated sales revenue for the nine months ended December 31, 2021 increased by 11.8%, to ¥10,677.0 billion from the same period last year, due mainly to increased sales revenue in Motorcycle business and Financial services business operations as well as positive foreign currency translation effects. Operating profit increased by 50.3%, to ¥671.6 billion from the same period last year, due mainly to an increase in profit attributable to increased sales revenue and model mix as well as decreased selling, general and administrative expenses. Profit before income taxes increased by 28.3%, to ¥845.2 billion from the same period last year. Profit for the period attributable to owners of the parent increased by 31.1%, to ¥582.1 billion from the same period last year.

Business Segments

Motorcycle Business

For the nine months ended December 31, 2020 and 2021

				Units (thousands)
	Honda Group Unit Sales*			Consolidated Unit Sales*
	Nine months	Nine months				Nine months	Nine months
	ended	ended	Change	%		ended	ended	Change	%
	Dec. 31, 2020	Dec. 31, 2021		Dec. 31, 2020	Dec. 31, 2021
Motorcycle Business	10,591	12,775	2,184	20.6		7,263		7,964		701	9.7
Japan	155	180	25	16.1	155		180	25	16.1
North America	240	332	92	38.3	240		332		92	38.3
Europe	159	240	81	50.9	159		240	81	50.9
Asia	9,257	10,902	1,645	17.8	5,929		6,091	162	2.7
Other Regions	780	1,121	341	43.7		780		1,121		341	43.7

• 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 27.3%, to ¥1,602.0 billion from the same period last year, due mainly to increased consolidated unit sales. Operating profit increased by 52.5%, to ¥232.3 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 nine months ended December 31, 2020 and 2021

				Units (thousands)
	Honda Group Unit Sales*			Consolidated Unit Sales*
	Nine months	Nine months				Nine months	Nine months
	ended	ended	Change	%		ended	ended	Change	%
	Dec. 31, 2020	Dec. 31, 2021		Dec. 31, 2020	Dec. 31, 2021
Automobile Business	3,425	3,000	(425)	(12.4)		1,899		1,792		(107)	(5.6)
Japan	418	385	(33)	(7.9)	366		335		(31)	(8.5)
North America	1,098	978	(120)	(10.9)	1,098	978	(120)	(10.9)
Europe	77	76	(1)	(1.3)	77		76		(1)	(1.3)
Asia	1,741	1,465	(276)	(15.9)	267		307		40	15.0
Other Regions	91	96	5	5.5	91		96		5	5.5

• 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 and others by our Japanese finance subsidiaries and provided 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 7.4%, to ¥6,668.6 billion from the same period last year, due mainly to positive foreign currency translation effects, which was partially offset by decreased consolidated unit sales. Operating profit increased by 258.3%, to ¥188.5 billion from the same period last year, due mainly to decreased selling, general and administrative expenses.

Financial Services Business

Sales revenue from external customers increased by 14.1%, to ¥2,114.3 billion from the same period last year, due mainly to an increase in revenues on disposition of lease vehicles and operating lease revenues. Operating profit increased by 3.0%, to ¥258.1 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 nine months ended December 31, 2020 and 2021

		Units (thousands)
	Honda Group Unit Sales / Consolidated Unit Sales*
	Nine months	Nine months
	ended	ended	Change	%
	Dec. 31, 2020	Dec. 31, 2021
Life Creation Business	3,855	4,500		645		16.7
Japan	233	266	33		14.2
North America	1,815	2,092	277		15.3
Europe	567	762	195		34.4
Asia	1,012	1,073	61		6.0
Other Regions	228	307	79		34.6

• 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 28.5%, to ¥291.9 billion from the same period last year, due mainly to increased consolidated unit sales in Life creation business. Operating loss was ¥7.4 billion, an improvement of ¥1.1 billion from the same period last year, due mainly to decreased operating costs in Other businesses. In addition, operating loss of aircraft and aircraft engines included in the Life creation and other businesses was ¥23.6 billion, an improvement of ¥0.8 billion from the same period last year.

Cash Flows

Consolidated cash and cash equivalents on December 31, 2021 decreased by ¥67.5 billion from March 31, 2021, to ¥2,690.4 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 ¥947.8 billion of cash inflows. Cash inflows from operating activities increased by ¥121.6 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 ¥381.7 billion of cash outflows. Cash outflows from investing activities decreased by ¥281.8 billion from the same period last year, due mainly to decreased payments for acquisitions of investments accounted for using the equity method as well as increased proceeds from sales and redemptions of other financial assets.

Net cash used in financing activities amounted to ¥692.1 billion of cash outflows. Cash outflows from financing activities increased by ¥773.6 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 nine months ended December 31, 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. for the three months ended June 30, 2021.

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" for the three months ended June 30, 2021.

Honda of the U.K. Manufacturing Ltd. and Honda Turkiye A.S. ceased production of automobiles for the three months ended September 30, 2021.

Research and Development

The changes in research and development activities by Honda and its subsidiaries for the nine months ended December 31, 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 in Honda and its subsidiaries for the nine months ended December 31, 2021 in Life creation business increased significantly from the same period last year. The increased unit production in Life creation business 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.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Position

March 31, 2021 and December 31, 2021

			Yen (millions)
Assets	Note	March 31,		December 31,
2021				2021
			unaudited				unaudited
Current assets:
Cash and cash equivalents	¥	2,758,020		¥	2,690,451
Trade receivables			801,814				716,296
Receivables from financial services			1,794,654			1,613,208
Other financial assets			295,307				407,358
Inventories			1,545,600				1,799,424
Other current assets			383,696				368,076
Total current assets			7,579,091				7,594,813
Non-current assets:
Investments accounted for using the equity method			891,002			902,008
Receivables from financial services			3,619,896			3,674,233
Other financial assets			628,533				765,484
Equipment on operating leases	6		4,919,916			5,075,682
Property, plant and equipment	7		3,021,514			2,971,461
Intangible assets			818,763				822,570
Deferred tax assets			99,552				100,540
Other non-current assets			342,763				342,988
Total non-current assets			14,341,939				14,654,966
Total assets		¥	21,921,030		¥	22,249,779
			Yen (millions)
Liabilities and Equity	Note	March 31,		December 31,
2021				2021
			unaudited				unaudited
Current liabilities:
Trade payables	¥	1,088,061		¥	1,033,941
Financing liabilities			3,005,624				3,103,481
Accrued expenses			415,106				297,558
Other financial liabilities			182,145				149,109
Income taxes payable			47,793				55,632
Provisions	8		362,151				262,373
Other current liabilities			614,577				616,044
Total current liabilities			5,715,457				5,518,138
Non-current liabilities:
Financing liabilities			4,715,361				4,486,260
Other financial liabilities			280,809				279,399
Retirement benefit liabilities			358,532				362,516
Provisions	8		278,890				252,876
Deferred tax liabilities			842,001				942,801
Other non-current liabilities			357,141				371,472
Total non-current liabilities			6,832,734				6,695,324
Total liabilities			12,548,191				12,213,462
Equity:
Common stock			86,067				86,067
Capital surplus			172,049				185,554
Treasury stock			(273,786)			(328,443)
Retained earnings			8,901,266				9,294,994
Other components of equity			196,710				532,690
Equity attributable to owners of the parent			9,082,306			9,770,862
Non-controlling interests			290,533				265,455
Total equity			9,372,839				10,036,317
Total liabilities and equity		¥	21,921,030		¥	22,249,779

See accompanying notes to condensed consolidated interim financial statements.