Honda 2013 Annual Report Download - page 35

Financial Review
Operating and Financial Review
Net Sales and Other Operating Revenue
Honda’s consolidated net sales and other operating revenue
(hereafter, “net sales”) for the fiscal year ended March 31,
2013, increased ¥1,929.8 billion, or 24.3%, to ¥9,877.9
billion from the fiscal year ended March 31, 2012, due mainly
to increased net sales in Automobile business by recovery
from the impact of the Great East Japan Earthquake and the
floods in Thailand and positive foreign currency translation
effects. Honda estimates that by applying Japanese yen
exchange rates of the previous fiscal year to the current fiscal
year, net sales for the year would have increased by approxi-
mately ¥1,773.9 billion, or 22.3%, compared to the increase
as reported of ¥1,929.8 billion, which includes positive
foreign currency translation effects.
Operating Costs and Expenses
Operating costs and expenses increased ¥1,616.4 billion, or
20.9%, to ¥9,333.1 billion from the previous fiscal year. Cost
of sales increased ¥1,425.5 billion, or 24.1%, to ¥7,345.1
billion from the previous fiscal year, due mainly to an increase
in costs attributable to increased consolidated unit sales in
Automobile business and negative foreign currency effects.
Selling, general and administrative expenses increased by
¥150.4 billion, or 11.8%, to ¥1,427.7 billion from the previous
fiscal year, due mainly to an increase in selling expenses
attributable to increased consolidated unit sales in Automobile
business and increased product warranty expenses. R&D
expenses increased by ¥40.4 billion, or 7.8%, to ¥560.2
billion from the previous fiscal year, due mainly to improving
safety and environmental technologies and enhancing of the
attractiveness of the products.
Operating Income
Operating income increased ¥313.4 billion, or 135.5%, to
¥544.8 billion from the previous fiscal year, due mainly to an
increase in income attributable to increased net sales and
continuing cost reduction, which was partially offset by
increased selling, general and administrative expenses and
increased R&D expenses. Excluding positive foreign currency
effects of ¥35.8 billion, Honda estimates operating income
increased ¥277.6 billion.
(With respect to the discussion above of the changes,
management identified the factors and used what it believes
to be a reasonable method to analyze the respective
changes in such factors. Management analyzed changes in
these factors at the levels of the Company and its material
consolidated subsidiaries. “Foreign currency effects” consist
of “translation adjustments,” which come from the translation
of the currency of foreign subsidiaries’ financial statements
into Japanese yen, and “foreign currency adjustments,”
which result from foreign-currency-denominated sales. With
respect to “foreign currency adjustments,” management
analyzed foreign currency adjustments primarily related to
the following currencies: U.S. dollar, Euro, Japanese yen and
others at the level of the Company and its material consoli-
dated subsidiaries.)
Income before Income Taxes and Equity in
Income of Affiliates
Income before income taxes and equity in income of affiliates
increased ¥231.4 billion, or 89.9%, to ¥488.8 billion. Main
factors of this increase except factors relating operating
income are as follows;
Unrealized gains and losses related to derivative instru-
ments had a negative impact of ¥36.8 billion. Other income
(expenses) excluding unrealized gains and losses related
to derivative instruments had a negative impact of ¥45.0
billion, due mainly to an increase in foreign currency
transaction losses.
Income Tax Expense
Income tax expense increased ¥43.2 billion, or 31.9%, to
¥178.9 billion from the previous fiscal year. The effective tax
rate decreased 16.1 percentage points to 36.6% from the
previous fiscal year. The decrease in the effective tax rate was
due mainly to a decrease in adjustments for the change in
income tax laws in Japan and a decrease in impact on
recognition of valuation allowance.
Equity in Income of Affiliates
Equity in income of affiliates decreased ¥17.6 billion, or
17.6%, to ¥82.7 billion, due mainly to a recognition of
impairment loss on certain investments in affiliates and a
decrease in income attributable to decreased net sales at
affiliates in Asia.
Net Income
Net income increased ¥170.5 billion, or 76.8%, to ¥392.6
billion from the previous fiscal year.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests increased
¥14.8 billion, or 140.6%, to ¥25.4 billion from the previous
fiscal year.
Net Sales and Other Operating Revenue
Years ended March 31
Yen (billions)
4,000
8,000
12,000
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Honda Motor Co., Ltd. 33