Honda-The Power of Dreams
Consolidated Financial Summary for the Fiscal 3rd Quarter Ended Dec 31, 2005 & Revised Forecast for Fiscal Year

All-time quarterly records for net sales and other operating revenue and net income, and equity in income of affiliates. Record as a third quarter for operating income. Fiscal year forecast revised upwards.

TOKYO, Japan, January 31, 2006 – Honda Motor Co., Ltd. announced that in the third quarter of the current fiscal year, it realized an all-time record for consolidated net sales and other operating revenue for any quarter due to increased sales in all business areas.

Honda also realized an all-time record for consolidated operating income for the fiscal third quarter, mainly because of increased revenues, cost reduction effects, positive effects from the depreciation of the Japanese Yen. These factors offset an increase in selling, general and administrative (SG&A) expenses and research and development (R&D) expenses. Income before income taxes decreased by 11.6% due to a negative effect from rapid depreciation of the Yen which caused difference in the exchange rate applied for transactions rate and sales rate, and a change in fair value of convertible bond and others. Net income for the period decreased by 11.7%, although an all-time record for any quarters in income of affiliates was realized.

The forecast for the entire fiscal year has been revised upwards as Honda also expects to set a record for that period.

Additionally, “Daiko-Henjyo” (a returning of substitution portion of pension funds to the government) will be carried out in the forth fiscal quarter. Approximately JPY 128 billion of gains from this procedure is included in the operating income of the fiscal year forecast.

Results for third quarter ended Dec. 31, 2005
(*record high for fiscal third quarter. **record high for any quarter)
  Yen ( billions )
  3rd Quarter ended
Dec. 31, 2004
3rd Quarter ended
Dec. 31, 2005
Difference
(% change)
Net sales and other operating revenue 2,133.8 2,472.0** + 338.1 (+15.8)
Operating income 157.6 194.9* + 37.3 (+ 23.7)
Income before income taxes 187.9 166.0 - 21.8 (- 11.6)
Equity in income of affiliates 29.3 29.6** + 0.2 (+ 1.0)
Net income 150.7 133.1* - 17.6 (- 11.7)


Basic net income per common share JPY 161.78 JPY 144.81 JPY -16.97 (- 10.5)
( Honda’s average rates:  JPY 117 = U.S. dollar 1    JPY 140 = Euro 1 )

Consolidated unit sales; All-time record for any quarter in motorcycle, and all-time record for the third fiscal quarter in power product business. (Totals include fully finished products made by Honda and its subsidiaries as well as unit sales of finished products and parts for local production at affiliates accounted for under the equity method.)

 

Motorcycles: 2.788 million units (+12.3%); mainly due to an increase in sales of parts for overseas production bound for affiliated companies in Asia and finished products in North America.
(Approximately 600,000 motorcycles with local procurement rates of 100% which were procured and sold by affiliates in China and India are not included in the financial results, in conformity with Generally Accepted Accounting Principles in the U.S.)

Automobiles: 816 thousand units (-0.1%); almost the same level as the corresponding period in 2004 was realized by the increase in the overseas sales which offset the decrease in the domestic market.

Power Products: 1.134 million units (+8.6%); the increase was due primarily to sales growth in Europe and Japan.

- Consolidated net sales and other operating revenue increased to JPY2,472.0 billion (+15.8%) , an all-time record for any quarter, and a sixth consecutive all-time record for the third fiscal quarter were attributable to the increase in all business areas.

- Consolidated operating income totaled JPY 194.9 billion (+23.7%), an all-time record for a third quarter, mainly consisting of increased revenues, cost reduction effects, and positive effects from the depreciation of the Japanese Yen. These factors offset an increase in selling, general and administrative (SG&A) expenses and research and development (R&D) expenses.

- Income before income taxes decreased to JPY 166.0 billion (-11.6%), primarily due to a negative effect from difference in the exchange rate applied for transactions and the sales rate, and a change in fair value of convertible bond, held by Honda for the purpose of onboard telecommunication services.

- Equity in income of affiliates increased to JPY 29.6 billion (+1.0%), an all-time record for any quarters, and fifth consecutive all-time record for the third fiscal quarter.

- Consolidated net income was JPY 133.1 billion (-11.7%).

- Consolidated net sales and other operating revenue for the first nine months of the fiscal year (April to December) totaled JPY 7,742.0 billion (+12.3%). Consolidated operating income for the period was JPY 528.0 billion (+7.6%), consolidated income before income taxes was JPY 479.7 billion (-9.1%) , equity in income of affiliates totaled JPY 76.8 billion (+0.5%), and consolidated net income totaled JPY 377.5 billion (-3.7%). The basic net income per common share was JPY 409.43 (-2.3%).

  Consolidated net sales and other operating revenue, operation income and equity in income of affiliates were all-time records for the period.


Forecasts for Fiscal Year Ending March 31, 2006

A sixth consecutive all-time record is forecast for consolidated net sales and other operating revenue based on the unit sales plans of 10.38 million motorcycles, 3.425 million automobiles and 5.73 million power products. (Unit sales of motorcycles, with local procurement rates of 100% which are produced and sold by affiliates in China and India, are expected to increase by 1.69 million units to a total of 2.69 million units, but are not included in the sales plan total and financial forecasts to be in conformity with Generally Accepted Accounting Principles in the U.S.)

Honda aims to set an all-time record for operating income, income before income taxes, equity in income of affiliates, and net income.

Moreover, “Daiko-Henjyo” (a returning of substitution portion of pension funds to the government) will be carried out in the forth fiscal quarter. In accordance with U.S. laws, approximately 128 billion yen of gains from this procedure is included in the operating income of the fiscal year forecast.

The consolidated forecast for the fiscal year ending March 31, 2006 is as follows:
  Yen (billions)
  Year ended
March 31, 2005
Current forecast for year ending March 31, 2006 Difference
(% change)
Oct 27, 2005
forecast
Net sales and other operating revenue 8,650.1 9,740.0 +1,089.8 (+12.6) 9,600.0
Operating income 630.9 860.0 +229.0 (+36.3) 675.0
Income before income taxes 656.8 825.0 +168.1 (+25.6) 655.0
Equity in income of affiliates 96.0 99.0 +2.9 (+ 3.1) 94.0
Net income 486.1 605.0 + 118.8 (+24.4) 490.0

(Honda’s average rates for the FY2006: JPY 112 = U.S. dollar 1 JPY 136 = Euro 1)
(Honda’s average rates for the fourth quarter of FY2006: JPY 110 = U.S. dollar 1 JPY 135 = Euro 1)