Overview of financial results for the fiscal year ended March 31, 2020
The spread of COVID-19 has caused the global economic slowdown and also have affected Honda’s consolidated financial results for the fiscal fourth quarter ended March 31, 2020.
Honda Group unit sales* of the Motorcycle business in the fiscal year ended March 31, 2020 were 19,340 thousand units, due mainly to a decrease in sales in India and Thailand, which was partially offset by the historical unit sales in Vietnam and Philippines. Honda Group unit sales of the Automobile business were 4,790 thousand units, due mainly to a decrease sales in the United States, China and India.
Sales revenue amounted to 14,931.0 billion yen, a decrease of 6.0% year on year, because of decreases in consolidated unite sales* of the automobile business as well as negative foreign currency translation effects, which was partially offset by increased sales revenue in the Financial services business.
Operating profit amounted to 633.6 billion yen, a decrease of 92.7 billion yen year on year. Honda estimates that by excluding negative foreign currency effects, one-time issues and COVID-19 effects(approximately 130.0 billion yen), operating profit would have increased by approximately 100.8 billion yen from the previous fiscal year, owing to the continuing cost reduction and decrease in selling, general and administrative expenses.
Share of profit of investments accounted for using the equity method amounted to 164.2 billion yen, a decrease of 64.6 billion yen from the previous fiscal year. This was due to the impact related to COVID-19 mainly in China (approximately 35.0 billion yen).
Profit for the year attributable to owners of the parent amounted to 455.7 billion yen.
*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.
Forecasts for the fiscal year ending March 31, 2021
For the fiscal year ending March 31, 2021, we expect sales revenue of 12,800.0 billion yen, a decrease of 14.3% year on year, operating profit of 200.0 billion yen, a decrease of 68.4% year on year, and profit before income taxes of 365.0 billion yen, a decrease of 53.8% year on year.* We are assuming an average JPY/USD exchange rate for the fiscal year ending March 31, 2021 of 106 yen to the US dollar, whereas the rate was 109 yen to the US dollar for the fiscal year ended March 31, 2020.*
Although the future is uncertain due to the impact related to COVID-19, further strengthening efforts to improve profitability, operating profit is planned to be 200.0 billion yen.
Capital investment and R&D expenses
For the fiscal year ended March 31, 2020, capital investment amounted to 375.6 billion yen, a decrease of 11.9% year on year. Principal items were investments related to new model introductions and the enhancement, streamlining and upgrading of production, sales and R&D facilities. For the fiscal year ending March 31, 2021, we are planning for capital investment of 350.0 billion yen*.
With respect to investment related to electrification, which is expected to grow in importance going forward, while we will leverage alliances in the area of motors for electric vehicles and for the joint development and mass production of fuel cell systems, we will seek to hold down an increase in capital investment by utilizing our corporate resources more efficiently.
At Honda, engineers are carrying out free and open-minded R&D activities to create unique and competitive products with advanced technologies.
In April 2020, Honda initiated organizational changes to its functions related to the development of automobile products by unifying the structure with Sales, Engineering/production and Buying/purchasing. Due to this change, Honda will improve Monozukuri by establishing efficient and consistent operation from development to production. In addition, Honda R&D Co., Ltd. will make changes to its organizational structure to further strengthen its initiatives to “create new value by exploring unknown worlds,” which is the original purpose of the establishment of Honda R&D.
For the fiscal year ended March 31, 2020, our R&D expenses amounted to 821.4 billion yen, which was basically unchanged from the previous year. For the current fiscal year ending March 31, 2021, we are planning for R&D expenses of 860.0 billion yen*. Working toward the future introduction of new technologies, including electrification technologies and advanced safety technologies, we are expecting R&D expenses to rise. However, we are working to hold down an increase in R&D expenses, while promoting efficiency of R&D activities through selection and concentration of R&D resources by seeking to further increase development efficiency in the existing business areas through achieving a 30% reduction in the number of man-hours for the development of mass-production models by 2025, promoting collaboration and proactively utilizing open innovation.
* As of August 5, 2020
Honda strives to carry out its operations worldwide from a global perspective and to increase its corporate value. With respect to the redistribution of profits to its shareholders, which we consider to be one of the most important management issues, the distribution of dividends is determined after taking into account, among others, its retained earnings for future growth and consolidated earnings performance based on a long-term perspective.
Honda acquires its own shares at a timing it deems optimal with the goal of improving the efficiency of its capital structure and implementing a flexible capital policy. Honda will allocate retained earnings toward financing R&D activities that are essential for its future growth, capital expenditures and investment programs that will expand its operations, and maintaining sound financial conditions.
Total cash dividends for the year ended March 31, 2020 were 112 yen per share, an increase of 1 yen per share from the annual dividends paid for the year ended March 31, 2019. Honda bought back shares for a total of 33 million shares, 96.2 billion yen. For the fiscal year ending March 31, 2021, we are forecasting total dividends of 44 yen per share.
* As of August 5, 2020
Honda strives to enhance corporate governance as one of the most important tasks for its management, based on the Company’s basic principle, in order to strengthen the trust of our shareholders/investors, customers and society; encourage timely, decisive and risk-considered decision-making; seek sustainable growth and the enhancement of corporate value over the mid-to long-term; and become “a company that society wants to exist.”
We will continue striving to increase corporate value to fulfill the expectations of our shareholders.