Fiscal Year Ended March 31, 2016 in Review
In terms of the business conditions that Honda faced, the U.S. economy continued to recover as employment conditions improved amid modest growth in housing starts and higher consumer spending, among other factors. Economic conditions recovered gradually in Europe as well, with employment and consumer spending both improving. The picture was mixed in Asia, with India posting a mild recovery even as China, Indonesia, and Thailand experienced varying degrees of economic slowdown. In Japan, growth remained modest as employment conditions generally improved and capital investment recovered.
In this environment, the Honda Group strove to build a stronger corporate enterprise that can respond swiftly and accurately to changes in the many and varied needs of customers and society at large. On the research and development front, the Honda Group took proactive steps in developing advanced technologies to enhance safety and environmental technologies as well as product appeal. On the production front, the Honda Group revamped its framework to further fortify its production operations and enable it to respond to changes in demand on a global basis. On the sales front, the Honda Group proactively enhanced its product lineup by launching products embodying new forms of value and supplying products across national boundaries.
As a result, Honda's consolidated sales revenue for the fiscal year ended March 31, 2016 totaled ¥14,601.1 billion, an increase of 9.6% compared to the previous year, reflecting higher sales in the automobile and financial services business operations. Operating profit amounted to ¥503.3 billion, a decrease of 24.9% compared to the previous fiscal year, due mainly to increased SG&A expenses including quality related product warranty expenses, and negative currency translation effects, despite gains from increased sales, changes in product mix and cost-reduction efforts. Profit before income taxes amounted to ¥635.4 billion a decrease of 21.2% compared to the previous fiscal year, and profit for the year attributable to owners of the parent amounted to ¥344.5 billion, a decrease of 32.4%.
Progress on Two Core Themes
Since my appointment as CEO, I have promoted two guiding themes for our business activities. These are the further advancement of our six-region global operation structure, and the development of challenging products that are characteristic of Honda. Based on these themes, we have considered measures and are making steady progress in their execution.
Further advancement of our six-region global operation structure
Honda divides the world into six regions, each of which operates as an autonomous organization with its own functional capabilities. In the automobile business, we have used this structure to develop regional models such as the Pilot in North America and the Brio series in Asia, which support growth by catering to the needs of customers in those regions. We have also developed the Civic, CR-V, Accord, Fit and HR-V as global models that we aim to market in every region. One of the strengths of Honda is that we have created product lineups for every region of the world based on a mixture of global and regional models.
Among our global models, the Civic underwent a full model change in North America in November 2015. With the fully remodeled Civic, we adopted a new platform to realize superior driving performance with a downsized turbo engine. It has been highly regarded by the media and customers in North America, and was named the North American Car of the Year in January 2016. It has also proven a hit in China and Thailand, and we plan to begin launching global models such as this one in Japan as soon as possible in order to leverage the strength of our product lineup.
Development of challenging products that are characteristic of Honda
In December 2015, we made the first customer delivery of the HondaJet, a new dimension in mobility for Honda. We have also begun lease sales of the Honda Walking Assist Device, a rehabilitative device, to corporate customers in Japan. We will develop this business in Japan and plan to seek opportunities to expand this business in overseas markets.
Meanwhile, we must also address the challenges that are created by constantly changing business conditions. All around the world there are accelerating demands to tackle global climate change and ensure greater transportation safety in society.
As part of our effort to address the challenge posed by global climate change, we seek to realize a society with zero CO2 emissions. To this end, Honda aims to halve CO2 emissions relative to the levels recorded in 2000 by 2050.
Widespread adoption of electrification technologies is essential to realizing this goal.
In our automobile business, we aim to make two-thirds of our overall unit sales from plug-in hybrid or hybrid vehicles and zero-emission vehicles by 2030. In particular, we will position plug-in hybrids at the core of electrification in the future and introduce an all-new plug-in hybrid model in North America in 2017, before gradually introducing plug-in hybrid variants for all our major models and rolling them out in every region. At the same time, we will continue to develop and popularize zero-emission vehicles such as electric vehicles and hydrogen-powered fuel cell vehicles. Our joint development of a next-generation automotive fuel cell system with our U.S. partner General Motors is moving forward smoothly and at the next stage, we aim to begin commercial sales by around 2020.
In our motorcycle business, we aim to launch the EV-CUB model based on the EV-CUB Concept electric motorcycle in 2018. Sales will initially begin in Japan followed by a plan to introduce the product to the major ASEAN markets as we take on the challenge of popularizing electric motorcycles.
We are also pursuing electrification in power products, aiming to expand our electrical product lineup, including electric powered lawn mowers, electric robotic lawn mowers, and electricity storage devices.
Next, in an effort to ensure greater transportation safety in society, Honda aims to eliminate traffic accidents to help create an accident-free society that is safe for every road user. To this end, we are conducting R&D into various technologies to improve driving safety.
The Honda SENSING advanced driver-assistive system is a result of these initiatives. We are actively promoting the adoption of this system, which utilizes precision detection capabilities based on cameras and radar, to apply the brakes to help avoid collisions with vehicles in front of the car, oncoming traffic, or pedestrians, thus preventing accidents. We plan to introduce a suite of these technologies progressively to Honda models in Japan. We are also developing a system for global use, initially appearing in the Civic in the United States.
With regard to automated driving technologies, which lie ahead in the evolution of driver-assistive systems for safer driving, we are also engaged in R&D targeting a range of technologies, including artificial intelligence, and aim to realize practical application of such a system for highway driving by 2020.
"The Power of Dreams" remains the spirit that drives the creative efforts of everyone at Honda. United, we will continue to pursue the realization of our dreams, while undertaking reforms to maximize the capabilities of Team Honda.
Honda appreciates the continuous and long-term understanding and support from our shareholders and investors toward our business operations.
June 16, 2016
President, Chief Executive Officer and Representative Director