Fiscal Year Ended March 31, 2015 in Review
Looking at the economic environment surrounding Honda, the United States experienced a gradual recovery in business conditions, mainly due to an improving jobs market, along with firm growth in housing investment and personal consumption. In Europe, economic activity returned to a recovery path, mainly due to gradual improvement in employment conditions. In the Asian economies, India saw an economic upturn, while China grew at a more gradual pace. Indonesia experienced a slower pace of expansion, while Thailand's economy weakened. In Japan, economic performance was sluggish, mainly due to weak personal consumption, despite an improving employment picture.
In such an economic environment, Honda's consolidated sales revenue for the fiscal year ended March 31, 2015 amounted to ¥13,328.0 billion, an increase of 6.6% compared to the previous fiscal year, due mainly to increased sales revenue in motorcycle business operations and favorable currency effects. Operating profit amounted to ¥670.6 billion, a decrease of 18.6% compared to the previous fiscal year, due mainly to increased SG&A expenses including product warranty expenses, despite continuing cost reduction efforts as well as positive currency translation effects. Profit before income taxes amounted to ¥806.2 billion, a decrease of 13.7% compared to the previous fiscal year, and profit for the year attributable to owners of the parent amounted to ¥509.4 billion, a decrease of 18.5%.
Our Future Initiatives
Creating a new Honda under two themes:
As I assume the presidency, I decided to promote two themes for creating a new Honda for the future. First is the further advancement of the six-region global operation structure and second is the continuous development of challenging products unique to Honda. In pursuit of these themes, I chose "Team Honda" as our key phrase.
Honda's strength is demonstrated when associates "at the spot" share high goals and work as "one team" with all the team members acting with strong aspirations.
During my career in Honda, I have amassed a broad range of experiences "at the spot" in North America, Japan, Europe and China through the development of products like the U.S. Odyssey. Through these experiences I learned how important it is for each and every associate to share a common goal and work together as "one team."
In order for such a team to produce good results, it is important to create opportunities for each team member to voice his or her own opinions and to have enough time for in-depth discussions. In short, it is essential to create a bottomup environment where the team can take action on its own initiative based on new discoveries or ideas.
My role as the president of the company, therefore, is to foster an environment where associates can work with energy and enthusiasm to create "Team Honda." Moreover, what Team Honda is striving to achieve is to have a strong bond with our customers and all Honda stakeholders through challenging products we create "at the spot."
Continue advancing with the six-region global operation structure:
Let me talk about how we are going to pursue the two themes under the key phrase of "Team Honda." First, the advancement of the six-region global operation structure.
Honda employs a unique matrix management structure, which divides the world into six regions and each region operates as an autonomous organization. Under this structure, each region has built up its own production capacity and established sales, development and purchasing functions. It has made it possible for some regions, including North America, Asia and China, to develop, produce and sell exclusive models for customers in those regions.
However, in the automobile business, there are some regions where sales volume has not grown as we expected due to changes in the business environments. In the meantime, investment was made based on the original plans. As a result, our overall global production capacity has expanded in excess of demand, and we recognize that it started to have a negative impact on our cost structure.
As the next step, therefore, I believe it is necessary to further advance this six-region structure. Maintaining a global vantage point on the status of regional production expansion, we will leverage our flexible production system to promote complementary relationships between each of the regions. To this end, we must enhance the operational functions of the global headquarters and introduce initiatives to promote this mutual inter-regional relationship.
Let me give you some examples of our recent initiatives. We decided to supply a portion of the North American Fit and European Jazz models from Japan. The next generation Civic 5-door, which will be produced in Europe, will be supplied to other regions, and the Canadian-made CR-V will be sold in Europe as well.
Advancing the six-region global operation structure means establishing a flexible production and supply system that features a mutually complementary function.
As for new production operations, in Nigeria, we created a new automobile assembly area within the property of the existing Honda motorcycle plant. We began production of the Accord in July 2015 using a semi-knockdown assembly method which utilizes parts and components supplied from Thailand. Annual production capacity of 1,000 units is a small step, however, we will continue moving forward steadily with our customers in Africa.
I firmly believe that enabling our six-region structure to function as a "team" will be the key to future advancement.
Delivering challenging products unique to Honda to our customers around the world:
Next, I would like to introduce some of the concrete initiatives we will take on for the pursuit of the second theme—the continuous development of challenging products unique to Honda.
Challenging products means products that feature unprecedented technologies and provide our customers with joy and inspiration. We can accomplish this only when the team works as one and thinks through each issue comprehensively.
The S660, which we introduced to the market in April 2015, is the embodiment of such a team effort. The team was newly-formed after a young associate proposed the ideal sports car he wanted to build. Furthermore, we will soon begin delivery of the HF120 jet engine and the HondaJet, a light business jet, after pursuing the dream for nearly 30 years. These are good examples of where team members thoroughly conceived a plan and worked as one toward a common goal while doggedly pursing unprecedented technologies.
In the area of automobile operations, the introduction of the all-new Civic, one of our global models, will begin in fall 2015 starting in North America. This all-new Civic will be built on a new platform and equipped with a new downsized turbo engine, and we will continue expanding the application of these new technologies to other models. Moreover, two other core models, CR-V and Accord, will undergo full model changes to make them even more appealing through the application of additional new technologies and innovative designs. Please look forward to the introduction of these all-new models.
In the area of next-generation energy technology, we are aiming to begin sales of the successor to FCX Clarity in Japan before the end of this fiscal year (ending March 31, 2016). Honda will evolve products, such as this fuel-cell vehicle, which uses electricity as a core technology, in order to usher in the next generation of mobility.
In the area of motorcycle operations, we will introduce the CRF1000L, a dual-purpose model, to European markets at the end of 2015, and then in Japan and North America. We are also ready to introduce other new products which will enable customers to experience qualities unique to Honda.
In the area of power product operations, Honda has been continuing its research and development of a Walking Assist Device which assists walking people with weakened leg muscles. As the first step, in November 2015 we are planning to begin lease sales of a Walking Assist Device to institutional customers in Japan as rehabilitation equipment or as an assistive device for walking therapy.
Team Honda in each area of motorcycles, automobiles and power products will continue creating challenging products that feature unprecedented ideas and technologies. I will be sincerely committed to increase such a corporate climate so that we can continue delivering joy and inspiration to our customers.
Returning Profit to Shareholders
Honda is striving to increase its corporate value by conducting business in each country while maintaining a global viewpoint. We consider the return of profits to our shareholders as one of our most important management responsibilities. We determine dividends while giving full consideration to our consolidated financial results from a long-term perspective. Moreover, Honda will implement necessary capital policy in a flexible manner, including the acquisition of our own shares, when needed for the purpose of improving capital efficiency.
The quarterly dividend for the fiscal fourth quarter is 22 yen per share, and the total cash dividend to be paid for the fiscal year ended March 31, 2015 is 88 yen per share, which includes a 22 yen per share dividend paid in each of the first, second and third quarters.
For the fiscal year ending March 31, 2016, we forecast 22 yen per share quarterly dividends, which add up to an annual dividend of 88 yen per share. We will continue to do our utmost to meet the expectations of our shareholders.
Honda is a company where each and every associate maintains a high level of initiative and works toward our dream to realize the joy of our customers. Honda associates always seek further advancement and growth while envisioning and carving out a better future. With the passion of our associates, Honda is striving to be a "company society wants to exist." Driven by "The Power of Dreams," Honda will continue taking on new challenges to create advanced innovations characteristic of Honda so that we can continue fulfilling the expectations of society and provide joy, inspiration and satisfaction to our customers.
Honda appreciates the continuous and long-term understanding and support of our shareholders and other investors toward our business operations.
July 6, 2015
President, Chief Executive Officer