Fiscal 2006 Results

In fiscal 2006, unit sales of power products rose 10.9%, to 5,876,000 units, due mainly to increased sales of general-purpose engines in North America.

Net sales from power product & other businesses, including intersegment sales within Honda, climbed 11.6%, to ¥382.5 billion, due to the increase in unit sales of power products. Operating income soared 86.3%, to ¥35.9 billion (including a ¥6.7 billion gain on the return of the substitutional portion of the Employees' Pension Funds to the Japanese government), and the operating margin was 9.4%.

North America
In North America, unit sales grew 12.5%, to 2,827,000 units. Increased demand for generators provided a strong boost to sales of both completed products and engines supplied on an OEM basis. Within the engine category, robust sales of large-scale models in the GX series, and within the completed products category, sales of inverter generators for camping that Honda created as a new market, as well as large-scale generators, have contributed to increased unit sales.

Europe
Unit sales in Europe grew 12.8%, to 1,477,000 units, bolstered by strong demand for GCV135 and GCV160 engines for lawn mower use, as well as the GX series for use in construction machines and tillers. Among completed products, the new HRX push lawn mower generated a considerable sales increase, encouraged by favorable weather.

Asia
In Asia, unit sales remained mostly unchanged, at 717,000 units. In April 2005, we restructured the operations of Jialing-Honda Motor Co., Ltd., a company in China that previously manufactured and sold power products and motorcycles. The company subsequently restarted its operations, concentrating solely on power products. This measure enabled us to better utilize our cost-competitive advantage, providing a solid boost to sales of products made in China and Thailand.

Other Regions
In other regions, unit sales climbed 10.5%, to 368,000 units. In Brazil, sales were robust for locally made GX series engines, which became more price-competitive as a result of further reductions in component procurement costs.
In Australia, we posted higher sales of green products, including the environmentally friendly HRU series of push lawn mowers and the UMK series of brush cutters.

During the year, Honda introduced the iGX440 advanced general-purpose engine. Highly friendly to the environment, the iGX440 features the world's first electronic governor*2, which regulates engine speed and thus improves responsiveness to varying engine loads. In Japan, we incorporated the iGX440 into the newly launched HSM1590i, a mid-size hybrid snowblower featuring a gasoline engine for removing snow and an electric motor for travel motion. The combination of the two power units facilitates switching between work modes and enhances user-friendliness. The new product has received a favorable response from customers.
In March 2006, we unveiled the Monpal ML200, a stylish four-wheel scooter with a comfortable ride and high maneuvering stability. It is the first commercially available vehicle to feature visibility enhancement design, adapted from the Honda ASV*3-3 advanced safety research vehicle.
Meanwhile, diffusion of our compact, home-use cogeneration system*4 increased in Japan. In fiscal 2006, sales increased strongly in line with growing worldwide environmental awareness. In January 2006, Tokyo Gas Co., Ltd., became a new distributor of this system.