Honda-The Power of Dreams
Consolidated Financial Summary for the Fiscal 1st Quarter Ended June 30, 2006

All-time 1st quarter record for net sales and other operating revenue, operating income, income before income taxes, and net income

TOKYO, Japan, July 26, 2006 – Honda Motor Co., Ltd. announced that it achieved its sixth consecutive all-time record for consolidated net sales and other operating revenue for the fiscal first quarter due to increased sales revenue in all business areas. Operating income increased due to increased profit from higher revenue, the decrease in research and development (R&D) expenses and positive currency effects of the depreciation of the Japanese Yen, despite the changes in the model mix, soaring raw materials costs exceeding continued cost reduction efforts and an increase in selling, general and administrative (SG&A) expenses. Honda also achieved all-time record for first quarter results for income before income taxes and net income, and an all-time record for any quarter in equity in income of affiliates.

Results for Fiscal 1st Quarter Ended June 30, 2006
(*record high for the fiscal 1st quarter **record high for any quarter)
  Yen ( billions )
  1st Quarter ended
June 30, 2005
1st Quarter ended
June 30, 2006
Difference
(% change)
Net sales and other operating revenue 2,264.5 2,599.7* + 335.1 (+ 14.8)
Operating income 170.3 203.5* + 33.1 (+ 19.4)
Income before income taxes 144.3 186.9* + 42.6 (+ 29.6)
Equity in income of affiliates 21.1 30.1** + 9.0 (+ 42.8)
Net income 110.6 143.4* + 32.7 (+ 29.6)


EPS (Note) JPY 59.87 JPY 78.46* +JPY 18.59 (+31.1)
(Honda’s average rate: JPY 114 = U.S. dollar 1 JPY 144 = Euro 1)
(Note) As of July 1, 2006, one share of the Company’s common stock was split into two, and EPS was calculated based on the issued shares after this 1:2 stock split.

Consolidated unit sales: All-time 1st quarter record unit sales were realized in the automobile and power product business areas. (The total includes fully finished products made by Honda and its subsidiaries as well as unit sales of fully finished products and parts for local production by affiliates accounted for under the equity method.)

  Motorcycles: 2.38 million units (-7.8%); the decrease was due mainly to lower sales of parts for overseas production bound for affiliated companies in Asia. (Of the unit sales of Honda-brand motorcycle products that are manufactured and sold by overseas affiliates accounted for under the equity method, those with respect to which parts for manufacturing were not supplied from Honda or such subsidiaries are not included in unit sales, in conformity with U.S. generally accepted accounting principles as well as net sales and other operating revenue, which amounted to approximately 500 thousands units.)

Automobiles: 896 thousand units (+6.7%); the eighth consecutive increase in sales units for the fiscal 1st quarter was realized due primarily to sales growth in North America and Asia.

Power Products: 1.724 million units (+16.3%); the fifth consecutive increase in sales units for the fiscal 1st quarter was realized due primarily to sales growth in North America and Europe.

- Consolidated net sales and other operating revenue increased in all business areas and totaled JPY 2,599.7 billion (+14.8%), realizing an all-time 1st quarter record for the sixth consecutive year.

- Consolidated operating income totaled JPY 203.5 billion (+19.4%), the third consecutive increase for the fiscal 1st quarter. The increased profit from higher revenue, a decrease in R&D expenses, and a positive currency effect of the depreciation of the Japanese Yen offset the negative impacts of changes in the model mix, soaring raw materials costs exceeding the continued cost reduction efforts, and an increase in SG&A expenses.

- Income before income taxes increased to JPY 186.9 billion (+29.6%), for the first increase in two years for the fiscal 1st quarter.

- Equity in income of affiliates totaled JPY 30.1 billion (+42.8%), for a seventh consecutive increase for the fiscal 1st quarter, due primarily to increased income in automobile operations in China.

- Consolidated net income was JPY 143.4 billion (+29.6%), for the first increase in two years for the fiscal 1st quarter.

Forecast for Fiscal Year Ending March 31, 2007

Honda aims to achieve JPY 10,700 billion of consolidated net sales and other operating revenue for the fiscal year ending March 31, 2007, a seventh consecutive all-time record, based on the unit sales plans of 10.82 million motorcycles, 3.72 million automobiles, and 6.03 million power products. (Of the unit sales of Honda-brand motorcycle products that are manufactured and sold by overseas affiliates accounted for under the equity method, those with respect to which parts for manufacturing were not supplied from Honda or such subsidiaries are not included in unit sales, in conformity with U.S. generally accepted accounting principles as well as net sales and other operating revenue, which amounted to approximately 3.19 million units)
Honda will carry out its business operations based on the goals described in the following chart with assumption of the average currency exchange rate of JPY 112 = U.S. dollar 1 (average rate for the first half of the fiscal year: JPY 114, second half of the fiscal year: JPY 110) and JPY 139 = Euro 1 (first half: JPY 144, second half: JPY 135).

  Yen (billions)
  Year ended
March 31, 2006
Forecast for year ending March 31, 2007 Difference
(% change)
(Reference): Previous forecast made on April 26
Net sales and other operating revenue 9,907.9 10,700.0 +792.0 (+8.0) 10,600.0
Operating income
[gain on Daiko-Henjo* excluded]
868.9
[730.8]
750.0 -118.9 (-13.7)
[+19.1 (+2.6) ]
750.0
Income before income taxes
[gain on Daiko-Henjo* excluded]
814.6
[676.6]
735.0 -79.6 (-9.8)
[+58.3 (+8.6) ]
735.0
Equity in income of affiliates 99.6 103.0 +3.3 (+3.4) 103.0
Net income
[gain on Daiko-Henjo* excluded]
597.0
[514.2]
550.0 -47.0 (-7.9)
[+35.7 (+7.0) ]
550.0

*The return of the substitutional portion of employees’ pension funds to the Japanese government