Honda Motor Co., Ltd. (HMC) Q1 2027 Earnings Report, Transcript and Summary

Thank you for taking time to join us today. We will now begin the announcement of Honda Motor Company Limited Fiscal First Quarter ended June 30, 2026 Financial Results. First, the executives in attendance. Masao Kawaguchi, Executive Officer and CFO.

This is Kawaguchi. How do you do?

Sumihiro Takahashi, Operating Executive, Head of Accounting and Finance Unit.

This is Takahashi speaking. How do you do?

Kawaguchi will outline the fiscal first quarter financial results and FY March 31, 2027 financial forecast, followed by Takahashi giving the details. Mr. Kawaguchi, please.

At the outset, I would like to express my heartfelt sympathies to all those affected by the earthquake that hit Kumamoto on July 28 and their families. I also sincerely pray for the swift recovery and reconstruction of the affected areas. This slide shows the operating status of our major production sites after the 2026 Kumamoto earthquake. Regarding Kumamoto factory, production is suspended from the evening of July 28 till August 7 for 9 days and recovery efforts are underway. Thanks to these efforts, operations have been partially resumed today. We will continue to work towards full-scale operations. Regarding our automobile production sites, there have been parts shortages resulting from damage sustained by some suppliers. At Saitama factory, operations will be suspended for a total of 6 days until August 19, including the summer break. And at Suzuka factory, operations will be suspended from August 6 tomorrow to the 19th in total of 5 days, including the summer break. We will monitor developments and decide when to resume production and we'll announce at the appropriate timing. Next, fiscal results for the first quarter of the fiscal year ending March 31, 2027. Operating profit for the first quarter was a record high JPY 530.7 billion. No EV-related losses were posted in this first quarter. Motorcycle business, all-time high quarterly operating profit and operating profit margin were achieved, driven by strong global sales, particularly in India and Brazil. Automobile business, despite struggle in China, unit sales steadily increased mainly in North America, resulting in operating profit of JPY 192.1 billion and an operating margin of 5.0%. Regarding consolidated business forecast for the fiscal year ending March 31, 2027, we revised the exchange rate assumption to JPY 155 per U.S. dollar. Operating profit has been revised upward by JPY 150 billion to JPY 650 billion. Uncertainty in the Middle East calls for careful risk assessment regarding unit sales, material costs and other factors. Therefore, these assumptions remain unchanged from the previous forecast. EV-related losses have also been revised to reflect the updated currency assumptions. Excluding EV-related losses, adjusted operating profit is projected at JPY 1.17 trillion, up JPY 170 billion from the previous forecast. Next, financial foundation and shareholder returns. As of the end of the first quarter, net cash of nonfinancial services business stood at JPY 3.3 trillion. We continue to maintain a substantial net cash position and a strong financial profile. Regarding shareholder returns, the forecast for the annual dividend for the fiscal year ending March 31, 2027, remains unchanged from the previous forecast at JPY 70 per share. While targeting DOE 3%, we will strive to provide stable and sustainable dividends. Now the details of the financial results will be given by Mr. Takahashi.

Next, I will explain the financial results. At first the first quarter total group unit sales year-on-year was motorcycle sales increased mainly in Asia and other regions, in particular, Brazil to 5,663,000 units. Automobile sales decreased to 786,000 units, led by lower sales in Asia, particularly China. Power Product sales decreased mainly in North America to 752,000 units. Next, the Q1 consolidated financial results year-on-year. Operating profit increased by JPY 286.5 billion to JPY 530.7 billion. Equity method investment profit increased by JPY 18.4 billion to JPY 22.6 billion. Quarterly profit attributable to owners of the parent company increased by JPY 254.2 billion to JPY 450.9 billion. Next, I will explain factors behind changes in adjusted operating profit, excluding EV-related losses year-on-year. Adjusted operating profit was JPY 530.7 billion, up by JPY 164.5 billion year-on-year. Sales impact was negative by JPY 6.1 billion because of the incremental incentives despite our unit sales increase. Price and cost impact, negative by JPY 3.3 billion due to the impact of the soaring material cost. Expenses impact, positive by JPY 6.7 billion. R&D impact is JPY 1.7 billion negative. Foreign currency impact positive by JPY 90.8 billion and the tariff impact was positive by JPY 78.1 billion. Regarding operating profit by business segment. In Motorcycle business, operating profit was JPY 233.9 billion, marking the highest ever operating profit and its margin of the quarter. In Automobile business, operating profit was JPY 192.1 billion. Financial Services business made JPY 105.8 billion and the Power Products and Other businesses ended in JPY 1.1 billion operating loss. For Motorcycle businesses, we achieved JPY 233.9 billion operating profit, up by JPY 44.9 billion year-on-year. Regarding factors for the changes, sales impact was positive by JPY 20.6 billion due to incremental unit sales, mainly in India and Brazil. Price and cost impact, negative by JPY 2.1 billion due to the impact of soaring raw material cost. Expenses impact positive by JPY 1.5 billion. R&D impact JPY 2 billion negative. Foreign currency impact positive by JPY 28.5 billion and the tariff impact was negative by JPY 1.6 billion. For Automobile business, we achieved JPY 192.1 billion adjusted operating profit, up by JPY 99.7 billion year-on-year. Regarding factors for the changes, sales impact was negative by JPY 38.6 billion due to incremental sales incentives, price and cost impact negative by JPY 1.9 billion due to the impact of soaring raw material costs. Expenses impact positive by JPY 5.6 billion. R&D impact JPY 800 million positive. Foreign currency impact positive by JPY 52.2 billion and the tariff impact was positive by JPY 81.6 billion. Regarding cash flow situations, free cash flows of our Non-Financial Services businesses was JPY 128.3 billion. Net cash at the end of the period was JPY 3,331.8 billion and operating cash flows after R&D adjustment was JPY 737.1 billion. Let me move on to the consolidated financial forecast for financial year ending in March 2027. We will keep the unit sales of the group same as the previous forecast, which will be Motorcycles, 22.8 million units; Automobiles, 3.39 million units and the Power Products, 3.65 million units. With regard to the consolidated financial forecast of financial year ending March '27, operating profit will be JPY 650 billion, up by JPY 150 billion over the previous guidance and the profit for the year attributable to owners of the parent will be JPY 400 billion, up by JPY 140 billion. Adjusted operating profit will be JPY 1.170 trillion, up by JPY 170 billion. Assumption foreign currency will be JPY 155 for dollar throughout the year. Regarding factors for changes in expected operating profit as compared to the previous forecast. Adjusted operating profit will increase by JPY 170 billion because of the ForEx assumption modified to JPY 155 for dollar. Regarding factors behind the difference of forecasted operating profit from the results of the previous term, adjusted operating profit will increase by JPY 130.6 billion year-on-year, for which sales impact will be positive by JPY 266.7 billion due to increase of the unit sales of the Motorcycles and Automobiles. Price and cost impact will be negative by JPY 313 billion due to the impact of soaring material costs affected by Middle East and so on, although the cost reduction and the price revisions will work positively for the profit. Expenses impact, negative by JPY 8 billion. R&D impact, JPY 10 billion positive. Foreign currency impact will be positive by JPY 28 billion, reflecting the updated assumptions and the tariff impact will be positive by JPY 147 billion. Forecast of capital expenditures, depreciation and amortization and R&D spending for FYE March 2027 will be expected as in the table. CapEx will reflect additional investments and so on for the acquisition of the factory buildings of a joint battery manufacturing company with LG Energy Solutions in the United States. Last but not least, regarding dividends, annual dividends for FYE March 2027 will be no different from the previous guidance, keeping JPY 70 per share. That is all. Thank you very much for your attention.

[Operator Instructions] The first question is from Asahi Shimbun Newspaper. Miura-san, please.

This is Miura from Asahi Shimbun. I have 2 questions. First, about the EV-related losses. In the first quarter, it is not factored in, but what is the reason? And also, throughout the year, it has increased to JPY 520 billion. But aside from the foreign exchange, are there other factors that affect this result? That's the first question.

Can you ask your second question, too?

Yes. The second question. It is related to Automobile market. I do understand that you have continuing to have difficulty in China, but can you explain the details? Also, for the full year, I think the forecast is lower than expected. But yet you have not revised your forecast for the full year sales. And also in July, I think that we have entered into extension of maintenance contract.

Thank you for the question. About the first question, about the EV-related losses. Allow me to answer that question. First, about the EV-related losses. As you know, North America EV strategy has changed. And as a result, in March, we made the announcement at maximum, JPY 2.5 trillion losses will be posted. And this is what we announced. In the previous year, of which already JPY 1.3 trillion has been included. And for this fiscal year, well, at the outset of this fiscal year, when we announced it, we were saying JPY 500 billion. The breakdown is the most of it is the compensation to our suppliers. About our suppliers and the negotiation that we're having vis-a-vis compensation. Currently, we are just -- we've just started communication with the suppliers. And we cannot say at this point in time how much compensation will be required. That is the current status. And therefore, in this first quarter, it's not the case that we can include this in our numbers. So that is the current situation. However, through the various communications, the premise that we set out at the beginning of the fiscal year is not being impacted. So that is understanding. Therefore, this time, in our forecast, again, we have maintained the JPY 500 billion that we have originally forecast. And with the foreign exchange impact, it has been revised to JPY 520 billion. Most of our suppliers are in North America. So there is a big foreign exchange impact. And therefore, the foreign exchange impact has been reflected this time in our forecast. The second question about automotive. Your sound was cut off. You were asking about China. Is that correct?

Yes. It's about China. In the forecast, I think you are forecasting 500,000 units. But looking at the actual sales, I think this is lower than expected. So what is your outlook? And also, excuse me, about an extension of the joint venture in July, can you explain about China?

First of all, overall, the market itself, the macroeconomics is very weak. And therefore, the overall market is not good. In addition to that, this is due to the oil price increase, I believe. But the breakdown is that ICE, Hybrid, these -- including EV, NEVs, new energy vehicles are seeing the numbers grow at this cost of ICE and Hybrid. So I think that as a result of the oil price increase, this transition is increasing. In the first quarter, just looking at China's ICE and Hybrid, compared to last year, I think that the market has shrunk by about 40%. So Honda has been selling mainly ICE and Hybrid. And that is the reason why we are seeing this impact. In addition to that, Honda, we are in the transition point of a model change. And so this first quarter, the retail unit is slightly more than 80,000. So it's about 50% less than last fiscal year first quarter. As you pointed out, in the initial -- at the outset of this fiscal year, we were saying 480,000 for the whole year. So 80,000 plus is judging from what we said at the outset of this fiscal year behind schedule. Now one of the reasons for this is because as Miura-san has asked, well, GAC. Well, we were originally planning to have the contract terminated in 2028. And amongst the Chinese companies, including the dealers, they were thinking that in 2028, the contract will not be extended. I think there are quite a few who are worried that the joint venture agreement would not be extended. And that was one of the reasons why we saw the sales growth low. But as for this contract, well, we knew that it will expire in 2028. And therefore, our joint venture partner, GAC, we have talked with them about future strategy, trying to come -- make a comeback recovery using local resources and also looking into how we should run the joint venture, we have had in-depth discussion with our partner. And as a result, we have looked into how we can see a recovery in the Chinese market. And we have an idea as to what strategy needs to be taken. And there were quite a few customers and dealers who are worried, but now we've reached this agreement to extend the contract. And this is the reason why we wanted to make this announcement early on, and we were early to extend the contract. That was the reason -- that was the situation.

So next question from [indiscernible] Shimbun Newspaper, Mr [indiscernible] please.

[indiscernible] speaking. Can you hear me?

Yes.

I have 2 questions. First one, the sales in China. Going forward, sales might stay low? And do you plan to have additional restructuring or something out of the plant, for instance, in the May update, you mentioned about the Chinese platform or the electronic supplies and so on. And what is the area of progress today? And what is your prospect about the upcoming progress in this regard? And the question 2, the collaboration and negotiation is going on with Nissan. And could you update me about the current status? And then for Honda -- what is the meaning of this collaboration with Nissan for Honda?

Thank you for your question. Question one about China. If the market still stays, what would happen? That's the question. And then until now, as Honda, we tried to adapt to the Chinese market by having a drastic and speedy adjustment of the production situations. For instance, ICE, we had 1.5 million car, the capacity before, but we had a lot of collaborations for the production adjustments with the 2 joint venture companies, with a high speed. And then in this term in June for the Guangzhou GAC, we decided to stop the line for China. Therefore, we had a capacity of a little less than 1.5 million cars. And then ICE and Hybrid, we now have 700-plus capacity today. That is the current status of the production capacity. And as for the fixed cost, of course, capacity is also supported by the indirect cost labor and so on that we need to streamline the sales force as well. And we have made a lot of progress in all of those areas. And then as I said before, currently, Chinese ICE and Hybrid market is shrinking, and that is more rapidly -- drastically progressing with the shrinkage of the market. Therefore, we do not have the specific measures as yet at the moment, but we will watch out the market situations, and we will keep discussing about the situations with the partner company. And another thing about China, the utilization of the local suppliers. If you look at the Chinese market, STVs and advanced technologies developed very fast. And also we can commonize the parts and so on with the suppliers over there, which make them competitive. And the cars, which make the customers in China feel valuable about the cars that is quite successful over there in their part, then in order for us to deliver the cars to the satisfaction, it is important, critical to make a good use of the local suppliers for us. And for ICE, the local suppliers can be utilized better. And for the next full model change, we are having very good discussions with suppliers for the next model change. And if we can complete those plans we have on the table, we will be able to provide competitive products for China. And for the EVs, we will have more discussions with the partner company trying to utilize their platform and discussions are going at the moment. So we will take advantage of them so that we can improve the lineup of the Chinese market to adapt to the market. This way, we can try to improve the competitiveness of the products for them. And once we are successful there, I mean, it will take another year or so before we become truly successful in reality. And until now, we have to be working very hard. And those initiatives we have at the moment are going on track. And the second question is about alliance with Nissan. In 2024 already, we -- even before the possible integration of the companies, we were talking about possible collaboration, partnership and SEVs, and we were already talking about possible joint programs, SDV joint development, batteries and exchange or sharing of the vehicle platforms and so on. And then the management integration has been abandoned unfortunately. And even that, we revisited the electrification efforts and so on. And in that backdrop, [ STVs ] importance still is there. So in each of those areas, we would like to work together with Nissan so that we can take advantage of the volume we have from each other. And I think this is a very good strategy for both of us. At the moment, we do not have any specific banker I can share. And of course, things going very fast there. And we will try and work hard so that we can give you some input sometime soon. And of course, we'd like to take advantage of the volume we have and there as well so that we can deliver the valuable products for the market.

Next question is from Yomiuri Shimbun Newspaper, Mr. Ukita, please.

This is Ukita speaking. Can you hear me? About the financial results, you say that you have an all-time high profit. So what is your impression? And I think the foreign exchange impact is large, but the reason for the increase in sales -- unit sales. And about Kumamoto earthquake, I think the impact is being prolonged. Well, all automobile manufacturers are being impacted. And I think that you are targeting for a recovery soon. But can you talk about what would happen if the suspension were to be prolonged?

Well, about the first quarter, how we see the numbers. Yes, we have an all-time high. So JPY 530 billion, this is a very powerful number, operating profit. And compared to our plan, though we have not disclosed this against that plan, it exceeds our original anticipation. Well, the first quarter, to begin with the case of Honda, the development costs and SG&A, it tends to be that it concentrates in the second half. And the numbers tend to be higher in the first quarter. But in addition to that, I think the foreign exchange impact. Well, currently, there has been a joint U.S. and Japan intervention, but there has been a fluctuation. But the first quarter, the yen was weaker than we expected. And also the raw material cost, this, again, compared to initial estimate, from the beginning of this year, we have been seeing that the steel prices and other raw material costs were going up. So that was that impact and the Middle East outlook is uncertain. We were anticipating that there would be inflation. Therefore, in the beginning, we were thinking that there will be a JPY 360 billion cost increase. So this was factored in. The first quarter in April, May, there were increase in raw material costs. But in June, it started to settle down. And therefore, compared to what we were assuming -- expecting, it did not go up as much as we had thought. And also the unit sales, as you said, the Motorcycle business did well, plus Automobiles, too. As I said, China, we did struggle. But in North America, especially, we saw that our unit sales increased significantly. Well, the gasoline prices are high now. So the market and customers are trying to switch to low fuel consumption, hybrid vehicles. So this was an advantage. In April, May, our share increased to more than 10% for the first time in 5 years. And this also had contributed to the high operating profit in the first quarter. Going forward, the Middle East impact will be seen in various areas. And it is hard for us to predict what will happen. And therefore, do you say -- do you think that this is as much as we can do? Well, there is no onetime factor. But I say we have to look at what the automobile sales could be like in the United States. Well, July was good, but we have to carefully monitor what will be happening in the U.S. market. About the motorcycle unit sales, India. Last year, well, the GST, the tax was cut, and therefore, the market was strong. And this is still continuing now. We are thinking that we wanted to increase the numbers more. But because of the production capacity and others, well, India, we are increasing the capacity, but I think we should be trying to increase it more. But thanks to the India as well as Brazil, the economy is stable. And thanks to that, we have increased our motorcycle production capacity in Brazil, too. So these were the contributors. Now the second question about Kumamoto earthquake. If I may repeat, I would like to express my sympathy to those who have been affected by the mega earthquake. Our motorcycle plant is in Kumamoto. The impact of the earthquake there. We -- at the time of the earthquake, the sprinkler reacted. And so the plant was soaked in water, and we are trying to recover now. But as for the equipment, so far, we don't see that there has been any major damage to the equipment. Currently, within the plant, they are making the confirmation with safety first. And where we can start -- restart, we are restarting. So as soon as possibly, we would like to fully restart operations. About Automobiles, the Saitama and Suzuka factories. Well, unfortunately, our suppliers have been hit by the earthquake, and we are communicating with them right now. And every day, the situation is changing. So we are keeping in close communication to understand when production can restart. But well, there will be a summer break next week. We were originally planning for the summer break. So up until that point in time, we have decided to suspend production. And after the summer break for about 2 days or 3 days rather, we will suspend operation. But during the summer break, up until the 19th, I think we will be getting a lot of information. And based on that, we would like to make the judgment.

Next [indiscernible]. Kosuke-san please.

Kosuke speaking. Kumamoto earthquakes, its impact. Could you elaborate a little bit more about it? Saitama, Suzuka plant and your subsidiary, Auto Body has a plan to stop. And specifically, what kind of parts or components affected by that? And the suppliers, there are -- well, how many suppliers have been affected causing some troubles with the supplies? And other automotive companies probably starting up again on the 6th of the month. And then there are some time differences of lags in case and what is the situation for you? Could you elaborate on that, please?

Kosuke-san, thank you for your question. So further information about it, right? And Saitama and Suzuka automotive plants and Auto Body as well. Several parts components, we are at the moment, checking on the situation. Damper is one of those major products affected at the moment. And Astemo group company, they had a plant near the epicenter. And I heard that they had quite a bigger damage on that. And I'm sure that they are focusing on the recovery. And we are talking with each other, trying to find out when they can restart again. And of course, they are working very hard, tracking to restart. And at the moment, we -- it is kind of difficult to get precise information. Same story for Astemo, but they are working very hard on that. And as far as we know at the moment, well, up until now, we decided that we should stop for a while until the recovery could come. And situation is quite dynamic changing every day, and I'm sure they're working very hard. But if there are any updates, we will let you know.

The next question please. [indiscernible].

This is [indiscernible] speaking. Can you hear me?

Yes.

I would like to ask about sales. Mr. Kawaguchi said that North America is doing well. On Page 7, about the factors that are contributing to the operating profit, you say that the product mix is plus. But about incentives, you said that incentives are increasing. So I think there might be an offset there. Incentives, they are mainly in North America, I believe. Well, Hybrid is strong, but I think it might be that incentives are increasing because of the competitive market. Can you explain about the situation in North America? That's one. Plus, the second question is about the domestic situation. Domestic sales is also doing well and focused, you are trying to increase the sales. But what are the factors contributing to this increase? And what is the outlook at the same time? Plus everyone is asking about this about the Kumamoto earthquake, I think this have an impact on sales. At this point in time, can you estimate how much impact it will have on unit sales and what you plan to do to recover, please?

Yes. Thank you for the question. About North America, as I said, the gasoline prices are soaring. And therefore, the customers are wanting to purchase hybrids. And even gasoline ICE vehicles, I think that because our fuel economy is very good, our models are popular. About incentives compared to last year, well, the models themselves, major models are on the verge of a model change. And this is as originally planned. But from the fourth quarter of last fiscal year, we have increased incentives because of the competition with the competitors. And therefore, we have tried to compete in terms of sales. Well, this is the incentive as planned. Well, last fiscal year, looking back, we had the issue of tariffs. And there was a special demand coming for people rushing in to buy before the tariffs were introduced. So compared to the first quarter, well, you might say that you cannot see the numbers clearly. But just looking at the first quarter alone, even if you look at just the first quarter, you will see and also from the share perspective and incentive perspective, I think that we have had a very solid result in this first quarter. Going forward, I think that the competitors will intensify competition. I mean we will try to bring down the incentives as much as possible. Looking at the July actual numbers, I think we are progressing well. The rest is up to the gasoline price. I think the customers' preference will be impacted by how the gasoline prices hover. So that is something that we have to look into. And about Japan, registered cars -- and well, I think that we have exceeded the previous year. Looking at the market, it's about 107% increase year-on-year. And we are saying 108%. So I think the market average was 107%, whereas we are 108%. Registered cars, especially Super-ONE. This model has been very popular amongst our customers. Of course, there was partially the subsidy that has been explained, but it is equipped with Boost mode, and it's very Honda-like. So the fans appreciate the EV because of its Honda identity, and Vezel and Step Wagon and Freed these models too. We have carried out sales promotion, and this has been very effective. So thanks to that, we are seeing this growth in the domestic market.

Now what about the outlook?

Well, this fiscal year, I think that we will carry out model change, which will be appealing to our customers. And therefore, we want to grow sales through these new models. But the BYD [indiscernible] is a big topic. And if you look at the details, I think the Chinese have been very conscious about the preference of Japanese customers. Price-wise also it's very strategic, and it is a threat. But looking at it from a different perspective, the Japanese EV market is only about 2%. EV is not that popular. So with this new EV player, so to say, it might be that this would have a positive impact on the market. And Honda also, we want to try to introduce different EV models to the Japanese market. And therefore, we want to try to build up the EV market here in Japan. Thank you.

About the earthquake impact, how about that?

Yes. To be very honest, we don't know how much impact it will have on our unit sales at this point in time. That's our honest situation -- position. But I don't think that there will be such a big impact. But at this point in time, I cannot give you any numbers as to how much impact it will have.

Next question from [indiscernible] Mr [ Yamada ], please.

Yamada from [indiscernible]. So Motorcycles very good. And you talked about India, Brazil, there utilizing the full capacity of the plant, I heard. And as for the plans, your unit sales plans is kept unchanged. And is this something you anticipated from the beginning? Or is that because of some other reasons behind such as the scheduling and so on, not in confidence, for instance? And another question is the EV-related losses. In the quarter 1, you do not have a full inclusion because of the supplier negotiations still going on. And can we expect some of those losses to be put up in the second quarter onward or little by little in the second half and onwards? What is the plan to handle those losses?

Thank you for your question. Second question will be addressed by Takahashi-san. And Motorcycles, the net sales is really good. And quarter 1, it is better than our immediate plans, our plans at the moment. And for the second half, at this moment, we do not have major concerns or anything. Maybe one thing could be the regulations in Vietnam. Since last year, we were talking about the restrictions of those riding of the motorcycles in some areas. However, they have a stepwise approach, and therefore, it is not causing a serious effect on that. And the Middle East, no one knows at the moment as to what is the impact to be for the global economy. We have to monitor what's going on and including Motorcycle businesses, we will watch carefully what's going on to update the plans for the sales.

EVs. Okay. So EV-related losses, we announced that in March. And from April, we have many negotiations with them talking about what kind of losses are expected from now. And we are still in the middle of the negotiations with them. And in the first quarter period, the negotiation went on continually. So we were not able to put it up in the book. And then we had lots of conversation with many suppliers. And then we will have more information once we get more confidence in those impact by that, we will be able to put them up as we go so much on the first half, so much on the second half and so on. So those will be calculated and factored into those financial results in stepwise approach as we go. So please understand how we do.

The next question, please. NHK, [ Taruno-san ], please.

This is Taruno from NHK. Can you hear me?

Yes.

I also have a question in relation to the Kumamoto earthquake. From the 19th onwards, you say that you'll make a judgment looking at the situation. But are you going to think about -- well, are you going to look into alternative sourcing? Or is it up to ASIMO that you will make the judgment? You say that you don't know at what point in time the recovery can take place. So am I correct in understanding that, that is the current situation? About -- the other question is about the foreign exchange. I think one of the major reasons for this good result is the currency. So I believe that the impact is about JPY 10 billion per JPY 1 fluctuation. But over the past 10 years, it has been going down. Yen is weak, and this is a positive for you. But -- so what is your thinking towards foreign exchange? If it's a weaker yen, is it an advantage for you? Or is that not necessarily the case? Can you explain?

Well, about the Kumamoto impact, we are saying we will resume on the 19th for automotive. But as we said [indiscernible], we have Tier 1, Tier 2, Tier 3 suppliers who have been affected. And we don't know at this point in time what the situation will be. So we don't have a 100% understanding of what the current status is. But as far as the information that we have at hand, we believe that at least until the 19th, we should suspend production. That is our current status. Its the case where we will have a drastic plan to source alternatively. Well, we have to talk with our suppliers about that. So at this point in time, we cannot say that it will be necessary to source from alternative sources or not. Unfortunately, we cannot say anything definitive. But despite this mega earthquake, everyone is making every effort to try to recover. And we also want to keep in close communication with the people there. That is the only thing that we can do at this point in time. About the currency impact and about the sensitivity. Well, in principle, we try to produce where the demand is. Like others, Honda, we are not exporting that much from Japan to the United States. That is the system that we have. Meanwhile, we have a large profit in the U.S. So when we convert this back into Japanese yen on our financial statements, we do see that the numbers are large. And taking all these things into consideration, we think the sensitivity is between JPY 10 billion to JPY 12 billion per yen. And so we say the EV-related losses. But we have a lot of American suppliers and payment to these suppliers because the U.S. denominated compensation will be that the weaker yen will be a disadvantage. For currency, especially in Asia and also in motorcycles, Brazil, well, we are doing this is in different markets. And for example, from India, we are exporting to different destinations. And I think so that also has an impact. So we cannot simply say that once the yen moves from JPY 1, then we have a JPY 10 billion impact. It's not as simple as that. So there are areas which are good and other areas that are bad. So we can offset. And this is what we think is necessary to meet these fluctuations in the currency. That is all.

Because of the time constraints, the next question is going to be the last one. Nikkei Automotive, [indiscernible] san.

[indiscernible] speaking. Can you hear me?

Yes.

So semiconductor supplies, DRAM memory, GM and Ford have a long-term supply agreement. And recently, AI provides a lot of demand for the memories and so on. But are there risks for the soaring prices or supply risks? Are there any impact on your businesses? And what is the countermeasures in the future for the semiconductors?

Thank you for your question. And as you said right now, DRAM and NAND memories. As you know, the cars have meters, ADAS, ECU, display, audios, which require semiconductors. And then cars will be more intelligent going forward and will need more semiconductors going forward. And as you mentioned, needs for the memories actually, the needs from the data centers and other businesses are very strong for this site. And then memory suppliers are trying hard as well to try to keep the good balance of the supply. And probably after the year '27, the efforts will be more effective in terms of the supplies. But for Honda, we try to get stable procurement based on the various initiatives. For instance, for the Automobile legacy memories, let's say, we are quite positive about those legacy type memories, and we would have more dealing with those suppliers of the semiconductor of the legacy ones. And then we would go for the long-term agreement where possible. And we have many initiatives that are trying to get hold on those semiconductor. I cannot give you the details at the moment. However, Honda has a good hands, the measures to get the supplies, and I do not have any problems. We don't have any problems about the procurement of that. However, the cost is soaring, getting more expensive then because of the supply-demand situation, the memory prices are going up. And right from the beginning of the financial year, we gave you the forecast. And then we already factored in the additional JPY 20 billion, JPY 30 billion cost increase because of the supply of the semiconductors, and we already know that. Thank you.

And with this, we would like to conclude our briefing session. As for the materials that we've used, they are posted on our website for you to refer to. Once again, we thank you for your participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]