Overview of financial results for the fiscal year ended March 31, 2021
Looking at the economic environment surrounding Honda in the fiscal year ended March 31, 2021, it continued to be difficult mainly due to the spread of COVID-19 infection and the impact of the semiconductor supply shortage.
Honda Group unit sales* of the Motorcycle business in the fiscal year ended March 31, 2021 were 15,132 thousand units, due mainly to a decrease in unit sales in Indonesia and India. Honda Group unit sales of the Automobile business were 4,546 thousand units, due mainly to a decrease in unit sales in North America and other regions, which offset the record unit sales achieved in China.
Sales revenue amounted to 13,170.5 billion yen, a decrease of 11.8% year-on-year, due mainly to decreased sales in all business operations. However, operating profit amounted to 660.2 billion yen, increased compared to the previous fiscal year. Despite of some unfavorable factors, due mainly to control of selling, general and administrative expenses, and cost reduction efforts based on a review of business activities, as well as an increase in profit due to a year-on-year difference in the amount of the provision for credit losses recorded for financial services business.
Share of profit of investments accounted for using the equity method amounted to 272.2 billion yen, an increase of 108.5 billion yen from the previous fiscal year, due mainly to an increase in unit sales in China.
Profit for the year attributable to owners of the parent company experienced a year-on-year increase and amounted to 657.4 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, 2022
For the fiscal year ending March 31, 2022, we expect sales revenue of 15,200.0 billion yen, an increase of 15.4% year-on-year, operating profit of 660.0 billion yen, the same as the previous fiscal year at -0.0%, and profit before income taxes of 870.0 billion yen, a decrease of 4.8% year-on-year.* We are assuming an average JPY/USD exchange rate for the fiscal year ending March 31, 2022 of 105 yen to the US dollar, whereas the rate was 106 yen to the US dollar for the fiscal year ended March 31, 2021.*
For operating profit, despite the impact of an increase in raw material prices, the impact of semiconductor supply shortages, and a year-on-year difference in the amount of the provision for credit losses recorded, Honda plans to achieve 660 billion yen for the fiscal year ending March 31, 2022 (FY22), equivalent to that of FY21, by increasing unit sales and making progress in initiatives to solidify its existing businesses such as optimizing production volume and further increasing manufacturing efficiency.
* As of May 14, 2021
Capital investment and R&D expenses
For the fiscal year ended March 31, 2021, capital investment amounted to 321.2 billion yen, due to the investments related to new model introductions and to the streamlining and upgrading of relevant facilities. For the fiscal year ending March 31, 2022, we are planning for capital investment of 320.0 billion yen*.
For the fiscal year ended March 31, 2021, our R&D expenses amounted to 780.0 billion yen, and for the current fiscal year ending March 31, 2022, we are planning for R&D expenses of 840.0 billion yen.*
To attain Honda’s goals of achieving “carbon neutrality” and “zero traffic fatalities” by 2050, it is essential to aggressively promote investments in R&D areas.
We plan to further raise the 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. Over the next 6 years, we plan for a total of approximately 5 trillion yen in R&D expenses.
* As of May 14, 2021
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.
We will strive to pay stable and continuous dividends aiming at a consolidated dividend payout ratio of approximately 30%.
Honda may also acquire its own shares at a timing that it deems optimal, with the goal of improving efficiency of its capital structure and implementing a flexible capital strategy.
Honda will allocate retained earnings toward financing R&D activities, which 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, 2021 were 110 yen per share. For the fiscal year ending March 31, 2022, we are forecasting total dividends of 110 yen per share, the same amount as for fiscal 2020.*
* As of May 14, 2021
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 continue to be “a company that society wants to exist”.
As a part of the measures to further enhance corporate governance, Honda made a transition to a company with three committees from June 2021. With a “nominating committee”, an “audit committee”, and a “compensation committee” organized as a part of the new corporate structure, outside directors comprise a majority of the members for each of these committees, and the new structure allows transfer of broad authority for business execution from the Board of Directors to executive officers. The aim of this move has been to further reinforce the supervisory functions of senior management and to promote quicker and more flexible decision-making processes, by achieving a clear separation between the supervisory functions and the executive functions in corporate management.
We will continue striving to increase corporate value to fulfill the expectations of our shareholders.