Honda Motor Co., Ltd. (NYSE:HMC) Q4 2024 Earnings Call Transcript May 11, 2024
Honda Motor Co., Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you so much for taking time to join us here today. And I'd like to begin Honda FY '24 financial results press conference. First, the executives in attendance today are Toshihiro Mibe, Director President and Representative Executive Officer. Hi, Mibe, and thank you very much. Shinji Aoyama, Director, Executive Vice President, Representative Executive Officer. Aoyama, thank you. Eiji Fujimura, Managing Executive Officer and CFO. And Fujimura, thank you very much. First, Mr. Mibe will give a summary of the results, followed by Mr. Aoyama who'll present the FY '24 results and FY '25 forecast and shareholder returns. Mr. Mibe, please.
Toshihiro Mibe: Once again, good afternoon. I'm Mibe. I'd like to first thank all of you for taking time today and providing generous support to Honda's business. As a mobility company, Handa Pilot its value proposition of 0 environmental impact and absolute safety through the social values of environment and safety, we aim to realize our vision of future mobility and an attractive mobility society. This will enable us to manifest a new corporate path of growth. We see for continuing understanding and support us Honda's initiatives. I would now like to review our FY '24 financial results and explain our forecast for FY '25. FY '24 operating profit was a historical high, JPY 1,381.9 billion. Operating profit margin was 6.8%. In FY '25, we will steadily dedicate resources to electrification and aim for operating profit of JPY 1.420 billion, operating profit margin of 7%, 1 year ahead of our original plan.
FY '24, cash flows from operating activities, the source for future investment, excluding R&D expenses was roughly JPY 3 trillion, up JPY 1 trillion year-on-year. We have the foundation to support future investment for growth. Shareholder returns is regarded as our top priority management issue. FY '24 dividend was JPY 68, up JPY 28 year-on-year. In FY '25, we will acquire a record high JPY 300 billion of the company's shares and realized a stable, continuous dividend policy. Next, I will review the initiatives we have taken towards establishing earnings base. Motorcycle business, in addition to our dominant position in Asia, we have expanded large motorcycle sales in advanced nations and expanded product lineup in South America to further strengthen our business structure and build a well-balanced global income structure.
Regarding automobile business where profitability was an issue. We increased commonality ratio of car models such as CR-V, Civic and Accord, reduced hybrid system costs and enhanced product appeal to steadily improve our business structure. We will further evolve performance and cost of a hybrid system, targeting the second half of this decade. Next, initiatives for enhancing corporate value. Accurately, the PBR remains less than onefold, we believe there are 3 reasons as shown. To address this, we will optimize capital through proactive shareholders returns, build and maintain earning base and work out granuality of electrification strategy. As for FY '25, we will acquire JPY 300 billion of our company shares and aim for an operating profit margin of 7%.
The details of our electrification strategy and capital allocation will be explained at the 2024 Honda business briefing on May 16. And through these initiatives and continuing dialogue with stakeholders will aim for an early achievement of our more than 1 PBR. Next, Mr. Aoyama will present the details of our financial results.
A fleet of motorcycles and vehicles lined up in an assembly line with workers in the background.
Shinji Aoyama: So let me explain about the actual results of FY 2024 followed by FY 2025 outlook and shareholders' returns. With regard to the updates of the main markets of total bills, the market declined in China, but increase in the United States due to the stable demand has led to the overall sales exceeding last year. Commodore businesses, the market Vietnam declined because of the ongoing slowdown. However, the unit sales increased in India and Brazil due to the solid demand contributing to the Opel market almost or similar to last year. Regarding Honda's group's rated sales of motorcycles, mainly due to equipment units in Europe as compared to last year, we achieved 18.819 [indiscernible] sales with the units sold mainly due to decrease in North America.
And for our product urgencies, we achieved 3.81 million units due to this decline in North America. This is the summary of the consolidated financial results. Also on the digital oil unit sales, thanks to the improvements of the model profitability, we achieved the operating profit of JPY 1.3819 trillion, up by JPY 601.2 billion. We accomplished the highest ever results in operating profits, profit before income taxes and profit for the year 2024 to other of the parent. ROIC was 9.5% and ROE, 9.2%. Let me explain factors of ups and downs of profits as compared to the last year. There were some impacts by inflation and so on. However, due to the effective price game that reflects the improved commercial value of the products and incremental auto bill unit sales.
We achieved JPY 1.31 trillion, operating profit up JPY 601.2 billion year-on-year. Profit before income taxes was JPY 1.64233 trillion, up by JPY 762.8 billion year-on-year. Regarding operating profit by business segment. Motorcycle business is JPY 556.2 billion, the highest ever result. Automobile business is JPY 560.6 billion. Financial services business JPY 273.9 billion. And for power products and other businesses, it was a negative JPY 8.8 billion. Free cash flow of our business companies, excluding financial businesses, was JPY 1.4609 trillion with JPY 3.7616 trillion of net cash balance at the end of the period. And next, let me explain financial forecast of FY 2025 on consolidated basis. Regarding our expected sales of Honda Group comparing to the last year for motorcycles, we expect 19.8 million units, reflecting the growth in main in Asia, 4.12 billion units of auto mobile is expected reflecting the equipment is mainly Japan and North America.
And for Power Products, we expect 3.66 million units, reflecting the decline mainly unit sales volume on a consolidated basis will increase in motorcycle and automobile businesses. Moving on to the outlook of the consolidate the financial results of FY 2025, operating profit will be JPY 1.42 trillion with the operating profit ratio of 7%. And the profit for the year attributable to orders of the bond will be JPY 1 trillion. Foreign exchange assumption is set for JPY 140 for dollar throughout the year. Factors behind those profit before income taxes forecast as follows. R&D and other expenses will increase. However, thanks to the pricing scheme that reflects the commercial value of the product, profit before income taxes will be JPY 1.25 trillion, down by JPY 142.3 billion year-on-year, and operating profit will be JPY 1.42 trillion, up by JPY 38 billion year-on-year.
These are the outlook on capital expenditures, depreciation, amortization and R&D spending for FY 2025 on the slide. Lastly, let me touch upon shareholder returns. Annual dividends for FY 2024 is JPY 68 per share, a JPY 28 more from the year before and JPY 10 higher than our previous projection. Dividend at the end of the year is JPY 39 per share. Annual dividend for FY 2025 is expected to be JPY 68 per share, same as FY 2024. In the Board of Directors meeting today, we made a decision to execute share buybacks up to JPY 300 billion. That concludes my presentation. Thank you very much.
