Honda Motor Co. (HMC) posted an 88.3% fall in profit to ¥31.8 billion ($394 million) or ¥17.64 per share (22 cents per share) in the first quarter of its fiscal year ended March 31, 2012 from ¥272.49 billion or ¥150.27 per share in the same quarter of the previous fiscal year. The decline in profit was attributable to the adverse impact of the earthquake and tsunami in Japan on March 11 and unfavorable currency translation effects.
Consolidated net sales and other operating revenues dipped 27.4% to ¥1.71 trillion ($21.24 billion) attributable to the same factors outlined above, despite increased revenues in the motorcycle business. However, at constant exchange rates, revenues decreased 22.7% from the prior year.
Consolidated operating profit plummeted 90.4% to ¥22.6 billion ($280 million) from ¥234.44 billion due to lower sales volume and model mix, increase in fixed cost per unit as production has reduced and the unfavorable foreign currency effect, despite a fall in selling, general and administrative expenses.
Segment Performance
Sales in the Automobile segment slashed 39.2% to 547,000 units due to production disruptions triggered by the earthquake. Revenues from external customers in the segment dipped 35.1% to ¥1.18 trillion ($14.58 billion) due to lower unit sales and unfavorable currency translation effects. The segment had an operating loss of ¥76.2 billion ($944.0 million) compared with an operating profit of $148.94 billion a year ago.
Sales in the Motorcycle segment fell 4.7% to 2.75 million units, driven by unit sales after the dissolution of a joint venture in Asia, a late shipment, and decreased sales in North America, despite increased unit sales in other regions including South America. Revenues from external customers inched up 3.2% to ¥330.36 billion ($4.09 billion). Operating income surged 43.5% to ¥44.93 billion ($557 million) from ¥31.32 billion in the prior year.
Revenues from Financial Services segment declined 9.1% to ¥135.8 billion ($1.68 billion). Operating income slid 1.9% to ¥53.6 billion ($664 million) from the same period last year due to the unfavorable foreign currency effects, despite the decreased allowance for losses on credit and lease residual values.
Honda Power Product and Other segment sales rose 5% to 1.51 million units due to an increase in unit sales in Europe, Asia and Japan, despite a decrease in North America. However, revenues from sales to external customers in the segment dropped 3.6% to ¥71.4 billion ($886 million), due to currency translation effects. The segment had an operating income of ¥260 million ($3 million) versus an operating loss of ¥581 million in the same period a year ago due mainly to an increase of unit sales in power products.
Financial Position
Consolidated cash and cash equivalents were ¥1.26 trillion as of June 30, 2011. Long-term debt amounted to ¥2.91 trillion as of the above date, translating into a long-term debt-to-capitalization ratio of 39.7%.
In the quarter, cash flow from operations fell to ¥201.70 billion from $337.95 billion in the fiscal year 2011-quarter, mainly due to a fall in net income. Meanwhile, capital expenditures increased to ¥73.55 billion from ¥53.23 billion in the comparable period of 2010.
Guidance
Honda, a Zacks #2 Rank (Buy) stock, has projected revenues to fall 2.7% to ¥8.70 trillion in fiscal 2012. Unit sales are expected to rise by 1.26 million to 12.71 million in the Motorcycle segment; fall 77,000 to 3.44 million in the Automobile segment; and go up 566,000 to 6.08 million in the Power Product and Other segment.
Operating profit is expected to decrease 52.6% to ¥270 billion, profit is anticipated to decline by 56.9% to ¥230 billion and earnings per share are expected to be ¥127.61.
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