HONDA MOTOR CO LTD annual report, Q4 FY2022

Abrir documento

Honda Motor Co., Ltd. — FY2022 Form 20-F

Reporting period: Fiscal year ended March 31, 2022 (not a standalone Q4 filing). Financial statements are prepared under IFRS and presented in Japanese yen. Figures below are yen billions unless stated otherwise.

Business context and results

Honda operates motorcycle, automobile, financial services, and life creation and other businesses. FY2022 results reflected a recovery in demand and favorable currency translation, alongside semiconductor shortages, higher raw-material costs, and ongoing pandemic disruption.

  • Revenue: ¥14,552.7, up 10.5% from ¥13,170.5. Management estimated growth of 5.1% at prior-year exchange rates.
  • Operating profit: ¥871.2, up 32.0%; operating margin was approximately 6.0%, versus 5.0% in FY2021. Favorable currency effects contributed about ¥168.9 to the increase; higher sales were partly offset by price and cost pressures.
  • Profit before tax: ¥1,070.2, up 17.1%. Net profit: ¥760.7, up 9.4%; profit attributable to Honda owners was ¥707.1, up 7.6%. Basic EPS rose to ¥411.09 from ¥380.75.
  • Cash flow: Operating cash flow was ¥1,679.6, versus ¥1,072.4; investing cash outflow was ¥376.1, versus ¥796.9; financing cash outflow was ¥615.7, versus ¥284.0. Cash and cash equivalents increased ¥916.9 to ¥3,674.9.
  • Margins and segment mix: Motorcycle revenue rose 22.3% to ¥2,185.3 and operating profit rose 38.7% to ¥311.5. Automobile revenue rose 6.8% to ¥9,147.5 and operating profit rose to ¥236.2 from ¥90.3. Financial services revenue rose 13.1% to ¥2,820.7, but operating profit fell 6.7% to ¥333.0. Life creation and other revenue rose 24.1% to ¥399.3; operating loss narrowed to ¥9.5.
  • Volumes: Consolidated motorcycle unit sales increased 4.5% to 10.721 million; automobile sales decreased 7.4% to 2.424 million; power-product sales increased 10.3% to 6.200 million.
  • Balance sheet and liquidity: Total assets were ¥23,973.2, total liabilities ¥13,200.6, and total equity ¥10,772.5. Current assets of ¥8,841.4 exceeded current liabilities of ¥6,004.4. Financing liabilities were ¥8,102.6, including substantial financial-services funding. Honda said cash was about three months of sales and sufficient for current needs; finance subsidiaries also had ¥1,226.1 of committed credit lines for commercial-paper liquidity.
  • Capital returns: FY2022 dividends totaled ¥120 per share (¥55 interim and ¥65 year-end). Honda’s stated policy targets a consolidated payout ratio of about 30%. It repurchased 18 million shares under an ¥70 billion authorization.

Material changes versus FY2021

  • Revenue and operating profit rebounded, with currency translation and higher motorcycle and financial-services revenue important contributors.
  • Net profit attributable to owners increased more modestly than operating profit; the effective tax rate rose to 28.9% from 23.9%, and equity-method profit declined ¥70.2.
  • Automobile unit sales continued to fall, mainly because of semiconductor constraints, particularly in North America. Motorcycle and power-product volumes recovered.
  • Operating cash flow strengthened, while investing outflows declined substantially. Cash rose by ¥916.9.
  • Other comprehensive income was ¥935.0, including ¥680.7 from foreign-operation translation; this helped lift reported equity.

Outlook, commentary, risks, and unusual items

  • Near-term outlook: Management said the global economy slowed in FY2022’s fourth quarter as the situation in Ukraine worsened and expected further near-term economic downturn. The filing does not provide a clear FY2023 earnings or revenue forecast.
  • Investment and strategy: Planned FY2023 capital expenditures were ¥500.0, excluding equipment on operating leases. Honda aims for carbon neutrality across products and business activities by 2050 and zero traffic-collision fatalities involving its motorcycles and automobiles globally by 2050. It plans to shift more resources toward electrification and software, develop solid-state batteries, and introduce EVs in major markets.
  • Key operating risks: Semiconductor and parts shortages, raw-material inflation, COVID-19, currency swings, regional economic weakness and Ukraine-related uncertainty could disrupt production, sales, costs, and supply chains. Honda also cites tighter emissions and fuel-efficiency rules, cyber and data-security threats, climate risks, competition, and credit and lease residual-value risk in financial services.
  • Credit and lease estimates: The financial-services credit-loss allowance was ¥39.1 at year-end; write-offs fell to ¥12.3 from ¥20.8. Management identified credit losses and leased-vehicle residual values as significant estimates. It estimated that a ¥10,000 reduction in North American auction values per leased vehicle would add about ¥5.6 to depreciation expense over remaining lease terms.
  • Warranty and legal matters: Product-warranty provisions ended at ¥419.2, down from ¥481.0; FY2022 provisions were ¥118.4. Honda described pending litigation as routine and did not expect a material adverse outcome, but said potential future losses related to airbag-inflator measures could not be reasonably estimated.
  • Funding: Honda issued US$2.75 billion of Green Bonds under its Sustainable Finance Framework. Contractual financing-liability payments totaled ¥8,391.5, including ¥3,219.0 due within one year.
  • Reporting controls: The auditor issued unqualified opinions on the IFRS financial statements and internal control over financial reporting.

Important facts for investors to verify

  1. Whether semiconductor availability, raw-material costs, and production constraints improve, and how those trends affect automobile volumes and margins.
  2. How much FY2022 operating-profit growth depended on favorable currency effects and whether those effects persist.
  3. Financial-services credit performance, lease-vehicle resale values, and the assumptions behind related loss allowances.
  4. The scale, timing, and funding of planned EV, battery, software, and other transition investments; compare the ¥500 billion FY2023 capital-expenditure estimate with subsequent disclosures.
  5. The scope and potential cost of airbag-inflator actions and other product-warranty or legal exposures.
  6. The filing presents differing FY2022 capital-expenditure totals in its narrative and segment disclosures; verify the applicable measure and basis against the audited statements.