Honda saw economic conditions in the U.S. continue to improve during the fiscal year ended March 31, 2013. This recovery in the U.S. was underscored by the job market improving, and by increased personal consumption, housing investment, and capital investment. Economic conditions in Europe, on the other hand, continued to stagnate owing to the debt crisis, negative GDP growth, and unemployment rates remaining high. Meanwhile, the Asian economy continued to expand. This expansion was driven by reconstruction demand from the flooding in Thailand and strong growth in Indonesia, even as the pace of economic growth in China and India eased. Japan continued on a gradual recovery path against a backdrop of a change to a weakening yen, a recovery in the stock market, an improvement in the employment situation as well as reconstruction demand from the Great East Japan Earthquake.
Honda's consolidated net sales and operating revenue increased 24.3% from the previous fiscal year to ¥9,877.9 billion. This was mainly the result of increased revenue in automobile business operations, which recovered from the impact of the Great East Japan Earthquake and the flooding in Thailand as well as favorable foreign currency translation effects.
Net income grew 73.6% year on year to ¥367.1 billion, resulting in earnings per share rising to ¥203.71.
In our motorcycle business operations, sales increased primarily in India and Thailand, but this was partly offset by diminishing sales in Brazil and Vietnam.
In our automobile business operations, sales grew throughout the world. This was largely attributable to markets recovering from the impact from the Great East Japan Earthquake and the flooding in Thailand, and the positive effects of new car model introductions.
In our power products business operations, sales were steady for engines, generators and certain other products in North America, as well as pumps and certain other products in Asia.
True globalization through structural reforms to stay a step ahead of the changing times
Structural changes in the global economy due to greater awareness of environmental issues worldwide and the growth of emerging countries have had a significant impact on our business activities. Our approach to date as a manufacturer has been to develop products for western and other developed markets, before expanding sales by modifying these products to suit the different specifications of regional markets around the world. However, market competition is intensifying with the growth of emerging economies, and the spread of information online is exerting a significant influence on customer preferences. Going forward, this will require us to make products tailored to every region of the world more speedily and affordably.
It is essential for us to create a framework and systems to respond to such changes if Honda is to achieve sustained growth in the future. In April 2013, as the first step in this process, we reorganized our operations to put the manufacturing functions for motorcycles, automobiles and power products under the control of the respective business divisions. By focusing our manufacturing resources at the divisional level, we aim to speed up decision-making and enhance our ability to cater to market trends and evolving customer preferences with greater speed and precision. We are also reinforcing production capabilities by integrating manufacturingrelated divisions.
At the same time, we are reforming production systems and building new plants as part of our ongoing efforts to increase production capacity and boost efficiency. We aim to cater to the varied needs of customers in different regions while seeking to reap economies of scale from global procurement and production.
In an era of rapid change, we will increase the value of the Honda brand by upgrading our ability to innovate, while working to achieve true globalization based on satisfying the needs of customers in every region of the world.
Growth framework optimally in tune with customer needs in each region
Many people in emerging countries such as India and Indonesia now use motorcycles to commute to work, and this trend is driving the continued volume growth in these major markets. In 2012, we launched the Dream Yuga in India as a model offering a competitive combination of performance and price in the 100cc segment, the largest of the "commuter" motorcycle market. Sales rose substantially as a result. We followed this with the launch of the Dream Neo model in 2013 to give customers a wider choice. Our New Technical Center in India began full-scale operations in January 2013, bringing together the R&D, production technology, procurement and quality control divisions. Our third factory in India began operating in June 2013, bolstering the framework for satisfying local customer expectations. We aim to further expand our presence in India, where demand is forecast to grow rapidly.
In March 2013, as part of developing new markets to undergird growth, we established Honda's third African motorcycle subsidiary in Kenya. Our first two operating bases are in Nigeria and South Africa. In Kenya, we plan to take advantage of our global procurement strength to create simplified local assembly capabilities so that we can offer local customers high-quality products at an affordable price. Looking ahead, we will continue to build Honda's presence in Africa.
To meet the demands for each market, our approach is to "start small and grow big." For instance, in Brazil we are now developing models with larger engines to cater to new and unmet needs. In Asia, meanwhile, we established a motorcycle subsidiary in Bangladesh, where growth is expected, and began motorcycle sales in Myanmar.
Leveraging global strengths to provide new value
We launched production and sales of the PCX series of 125cc-class scooters in September 2009 in Thailand, where our manufacturing is extremely cost competitive. Exports to developed countries began in March 2010. Competitively priced due to local production, the superior environmental performance and high finish quality offered in the PCX range has been well received in Europe, Japan and other developed markets. In June 2012, we began exporting 150cc engine models to meet the growing demand. In November 2012, the first of the new CB500 series middleweight motorbikes rolled off our Thai production lines. We plan to export this series as a global model for a wide range of markets across Asia and the developed world.
We aim to boost our presence in the "fun" segment of the motorcycle market by leveraging Honda's global strengths and offering new value with originality at an affordable price. As an example, in the middleweight motorcycle segment we introduced our New Mid Concept series of 700cc-class bikes. In February 2013, we launched the new-concept CTX series of 700cc cruisers. The name, which stands for "Comfort Technology Experience," sums up the appeal of a bike that is designed to be fun to ride, offering pleasure, comfort and maneuverability with dynamic styling.
Going forward, in addition to responding to market demand, we will continue to seek to offer new value to customers with the Honda brand.
Responding promptly to customer needs around the world by leveraging global operation reform
In the automobile business, to address the needs of customers around the world quickly, we are reforming our global operations so that we can make vehicles with top-level specifications at a competitive cost. These reforms entail several initiatives. The first is concurrent development across all six regions from the same early stage of model development. The second is adoption of locally optimized design drawings, which will enable Honda to create products designed to cater specifically to local needs, while using local sourcing and production infrastructure to the maximum extent possible. Third, we aim to improve production efficiency with the start-up of plants dedicated to small car production, such as the Yorii Plant in July 2013 and a new plant in Mexico in the first half of 2014. We aim to meet the varying needs of customers in different regions while leveraging global economies of scale.
As I mentioned earlier, the business conditions facing Honda are undergoing a dramatic transformation. In response, we must be able to react quickly to shifting customer preferences in different regions worldwide, while continuing to build the value of the Honda brand. Reinforcing our R&D and procurement operations around the world promises to enhance our local development capabilities and will enable us to realize concurrent vehicle development across the six regions as well as optimize local design drawings. At Yorii and the new Mexican plant, we plan not only to use innovative technologies to achieve world-class energy efficiency in automobile production, but also to improve manufacturing efficiency by taking small vehicle production technology to new heights.
These global operational reforms have been applied to the development of the all-new Fit (Jazz) series, a global model that we plan to start rolling out in 2013. This series will be one of the main models supporting future growth in our automobile business. We have taken advantage of the timing of this full model change to foster further evolution in the way we make cars at Honda.
Growth with products developed to meet market demands around the world
Turning to regional market developments, our launch of the new Accord in 2012 was well received in North America, where economic recovery is underway. In addition, we will strive to bolster sales of core models such as the Civic, CR-V, Odyssey and Pilot. From 2012, we also began a three-year program of updating the entire range of models under the Acura brand. The Acura RLX flagship sedan introduced in March 2013 features a newly developed engine and the world-first Precision All-Wheel Steer? system, which achieves both high maneuverability and stability. It also utilizes many advanced technologies to deliver outstanding fuel efficiency in a package that is fun to drive. Going forward, we plan to continue honing the Acura brand with cutting-edge technology.
In China, while reinforcing local development capabilities, we are introducing products that focus on the needs of Chinese customers. Over three years beginning in 2013, we plan to roll out twelve new and fully remodeled Honda models for the Chinese market. In Asia, we aim to succeed in the extremely competitive market for affordable cars and to fulfill diverse customer needs by adding sedan and utility-type models to the existing Honda range, based on the Brio platform, one of our strategic models for Asia.
Our new N series of mini-vehicles has proved popular in Japan. We plan to add another five models to our mini-vehicle lineup by the end of 2015. Combined with the all-new Fit series, we will leverage our strong product strength to significantly boost our presence in the Japanese market.
We continue to develop our "Earth Dreams Technology," a series of next-generation powertrain technologies that realize high-level driving performance and fuel efficiency based on the development of more efficient engines and transmissions, combined with the use of advanced electromotive technology. This includes hybrid vehicles, for which we are developing distinct powertrain systems based on one, two or three motors to improve fuel economy, while also infusing vehicle performance with Honda-style fun. We believe this approach will enable us to provide vehicles which suit diverse customer needs.
We have also developed a new, smaller 1.6-liter diesel engine. It was fitted to the new Civic launched in Europe in February 2013. In India, where diesel-powered vehicles are in high demand as well, in April 2013 we introduced the Amaze sedan fitted with a new 1.5-liter diesel engine. In addition to superior fuel economy, the Amaze is price competitive due to local sourcing and production. It promises to boost our ability to compete in the Indian market.
At Honda, we will continue to introduce new models that seek to fulfill the dreams of our customers by creating automobiles designed to deliver fun and pure driving enjoyment.
Power Product and Other Businesses
Responding efficiently to customer needs by integrating production-related functions
Honda's power products business is founded on the philosophy of applying technology to deliver useful power to people in the form of a wide variety of lifestyle products based around a core range of general-purpose engines. The first Honda power products were produced in Japan, and our first factory dedicated to these products was built in the U.S. in 1984. We have since established production facilities around the world in Thailand, India, China, France and Australia. Cumulative global production surpassed 100 million units in 2011.
Our production bases worldwide for power products provide global production capacity as well as R&D capabilities. As in the motorcycle and automobile operations, we are working to integrate these production-related functions to realize increased development and production efficiencies. Providing good products to customers around the world with speed, affordability and low CO2 emissions will be a source of future growth for Honda. We aim to expand this business by supplying products that fulfill the specific and unique needs of customers in different regions of the world.
Building a sustainable society with R&D in the power generation field
Heightened eco-consciousness is driving the demand for better energy solutions for the home. Responding to these needs, Honda is advancing cogeneration unit technology, while focusing on the development of the Honda Smart Home System (HSHS), which comprehensively controls household energy supply and demand. The HSHS reduces a household's CO2 emissions by using the gas-powered cogeneration unit to generate all the heat and electricity required by the household, managing both the supply and consumption of power within the home. It also connects homes interactively with electromotive mobility via power sharing and communication links, while ensuring a backup power supply in an emergency. We agreed to participate in the E-KIZUNA Project in 2011 in the city of Saitama. As part of this, we installed and began testing the HSHS in demonstration houses in 2012. These houses will form part of a small community to test Honda's communication network for interactively managing and sharing energy in a residential setting. Our goal is to commercialize HSHS and apply it in smart homes and in the building of smart communities.
At Honda, our vision remains to supply people with products that deliver value and utility in daily life, based on the technological expertise that we have cultivated over many years.
Return to Shareholders
Honda strives to conduct its business in countries around the world from a global perspective as it endeavors to increase its corporate value. We consider the return of profits to shareholders to be one of our most-important management responsibilities. Our basic policy for dividends is to make distributions after taking into account our consolidated earnings performance over the long term. Honda may also acquire its own shares at a timing that it deems optimal, with the goal of improving efficiency of the Company's capital structure and implementing a flexible capital structure policy.
For the fiscal year ended March 2013, Honda set a year-end cash dividend of ¥19 per share, bringing total cash dividends applicable to the fiscal year to ¥76. This annual dividend includes ¥19 per share dividends for the first, second and third quarters.
For the fiscal year ending March 31, 2014, we expect to pay quarterly dividends of ¥20 per share, for an annual dividend of ¥80 per share, ¥4 higher than for the fiscal year ended March 31, 2013. We will continue to do our utmost to meet the expectations of our shareholders.
Honda is a company where each and every officer and associate aspires to realize the dream of providing joy to Honda customers. We are a company that seeks to realize a more prosperous future by constantly pursuing progress and growth through the opening of new frontiers. We strive "to be a company that society wants to exist" and will continue to draw upon "The Power of Dreams" as we seek to meet and exceed the expectations of society, and bring joy, inspiration and satisfaction to our customers through the creation of advanced technologies and products.
We look forward to the continued and long-term understanding and support of our shareholders and other investors.
June 19, 2013
President & Chief Executive Officer