Nissan: Remarks on Nissan Motor Co., Ltd. FY14 3Q financial results from Joji Tagawa, Corporate Vice President

RELATED: Nissan reports 23.6% rise in net income to $3.2 billion for first
nine months of FY2014

Overall, in spite of challenges in the market environment, Nissan has delivered solid financial results as we continue to execute our Nissan Power 88 mid-term plan and profitably grow our business. For the nine month period ending December 31st of 2014, we are reporting consolidated net revenues of 8.1 trillion yen. This represents an 11.1% increase over the same period in 2013. Operating profit increased 39% to 417.9 billion yen, which equates to an operating margin of 5.2%. Net income increased 23.6% to 338.8 billion yen, which represents a 4.2% net margin. Free cash flow for the automotive business was 155.7 billion yen and we ended the period in a net cash position of 1.18 trillion yen.

Looking specifically at the third quarter, our growth in the US market and the benefits of the normalizing yen dollar exchange rate outweighed the negative effects of slowing demand in some markets, notably China and Japan, as well as the continuing political and economic situations in Russia.

Before going through the financial results in more detail, I will outline some of the operational highlights of the period.

FY 14 3Q, business update

On the Product front, Nissan continued to see the benefits of its Common Module Family architecture, shared by the new Qashqai, the Rogue and the X-Trail. Each of these vehicles has increased sales volume. Compared to the previous year, Qashqai rose by 22% in Europe; Rogue increased 16% in the US and X-Trail increased seven-fold in China and by 74% in Japan.

These models continue to capture important enthusiast awards in many markets. Just last month, the X-Trail was named Car of the Year in China.

Nissan is maintaining its product offensive. During the past two months, we launched the third generation Murano in the US and unveiled two important products at the North American International Auto Show in Detroit. The first was the all-new Titan, which will go on sale later this year in the US. The second was the Infiniti Q60 Concept, an important precursor to a new sports coupe that will go into production in 2016. And last week, we unveiled the all-new Maxima, which will go on sale this year in the US.

Nissan continues to demonstrate its leadership in autonomous drive systems and advanced technologies.

Last month, Nissan and NASA announced a five-year research and development partnership. This will enable us to test a fleet of zero-emission autonomous vehicles at the Ames Research Center in California. Each party will also benefit from the others ongoing research into autonomous drive systems and artificial intelligence.

RJC, the Researchers’ and Journalists’ Conference of Japan, recognized Nissan with its technology of the year award for our world-first Direct Adaptive Steering technology system. This system is used in the Skyline sedan in Japan and the Infiniti Q50 overseas.

Finally, Nissan entered into an agreement to license its Around View Monitor with Moving Object Detection technology to Hitachi Construction Machinery Co., Ltd.

Nissan’s commitment to zero-emission mobility has never been stronger. Since its introduction, the Nissan LEAF has sold over 158,000 units and has reinforced its position as the world’s best-selling EV.

Together with our Alliance Partner, Renault, we have sold more than 200,000 electric vehicles.

An important element of continued market growth is the development of the charging infrastructure.

Recently, Nissan expanded the “No Charge to Charge” free public charging stations in a growing number of key US cities.

And in Japan, the estimated number of quick charging stations will reach nearly 6,000 units by the end of fiscal year 2014. Total charging stations, including normal chargers and those in homes, now total 40,000 units. In comparison, there are roughly 34,000 gasoline stations in Japan.

The Renault Nissan Alliance is one of the leading forces in the global automotive industry. In calendar year 2014, we continued as the fourth largest OEM with global sales of 8.5 million units.

Having summarized some of our third quarter operational highlights, I will go now through our overall performance for the nine months in detail, starting with our sales performance.

FY14 3Q sales performance

For the nine months ending December 31, overall global industry volumes increased 2.8% to 63.42 million units.

Nissan’s overall sales results increased 4.4% to 3.8 million units in the first three quarters of the fiscal year, as strong growth in North America and Europe enabled us to out-perform the industry in those regions.
In Japan, the Total Industry Volume – or TIV – fell by 3.4%, to 3.72 million units. Nissan’s sales decreased 10.5% to 417,000 unit sales, resulting in a market share of 11.2%.

In China, TIV for the first nine months increased 7.7% to 16.12 million units. Nissan sales increased 5.2% to 879,000 units. For the calendar year, TIV increased 7.6% to 22.34 million units, while Nissan’s sales reached 1.22 million units, with notable gains by the X-Trail and Sylphy. Our overall market share in China was 5.5%.

Turning to North America; In the US, TIV increased 7.3% to 12.78 million units. Nissan’s sales volume out-performed the market with an increase of 10.9% to 1.03 million units, driven by demand for the Rogue and Altima models. Market share improved 0.3 points to 8.1%. In Canada, sales were up 26.1% to 92,000 units. In Mexico, Nissan maintained its strong market share position at 25.9%, with a 13.8% increase in sales to 229,000 units for the period.

In Europe, TIV showed signs of stabilization with unit volumes reaching 13.2 million units. Nissan’s sales increased 13.4%, resulting in a record market share of 4.1%. Excluding Russia, Nissan’s retail sales reached 400,000 units, a 12.7% increase. Market share improved 0.3 points to 3.6%.

In Russia, the weakening of the ruble and economic uncertainty undermined consumer confidence. However, Nissan’s sales in Russia increased 15.5% to 134,000 unit sales, which was a 7.1% market share.

In other markets – including ASEAN, Africa and Latin America – economic conditions remain stagnant. Nissan’s sales volumes were flat increasing just 0.9% to 651,000. Of those markets, Asia and Oceania recorded a drop of 1.9% to 267,000 units. Latin America fell 3.4% to 142,000 units. Only the Middle East recorded an increase, up 11% to 169,000 units.

FY14 9-month financial performance

I will now move to our overall financial performance for the period. As you know, our financial statements are prepared using the equity accounting basis for our joint venture in China. On this basis, consolidated net revenues for the period increased by 11.1% or 809.9 billion yen to 8.09 trillion yen, primarily driven by higher unit sales and translation benefit on overseas revenue from the normalization of the yen.

Consolidated operating profit totaled 417.9 billion yen, up 39% vs the prior year period and yielding a 5.2% operating margin. Net income was 338.8 billion yen, up 23.6% from the same period of fiscal 2013.

Looking at the Operating Profit movement in detail:

  • The 41.8 billion yen impact from foreign exchange came mainly from the correction of the yen against the U.S. dollar, which was partially offset by the ruble.
  • Cost items resulted in a net savings of 71.4 billion yen.
  • Volume and mix produced a positive impact of 54.6 billion yen.
  • The increase in selling expenses resulted in a 26.4 billion yen negative movement.
  • RD expenses increased by 8.3 billion yen.
  • Manufacturing expenses were 15.1 billion yen, and
  • Other items had a negative impact of 0.8 billion yen.

At the end of the period, our net automotive cash position was 1.18 trillion yen, up 533.9 billion yen compared with 643.5 billion yen at the end of December 2013.

Looking at our results for the period on a “Management Pro-forma” basis which includes the proportional consolidation of our China JV, revenues for the fiscal nine month period rose to 8.79 trillion yen. Operating profit was 516.8 billion yen, net income rose to 338.8 billion yen. Automotive free cash flow was 162.5 billion yen and we ended the period with an automotive net cash position of 1.3 trillion yen.

The results represent a significant improvement over the pro forma figures for the same period of fiscal 2013, with revenues up 10.8%. Operating profit rose by 39.4% with the operating margin improving by 1.2 percentage points from 4.7% to 5.9%. Net income increased 23.6% from the prior year period.

FY14 outlook

For the remainder of the year, we anticipate market conditions will remain challenging – continuing the trend experienced recently – as we do not expect to see significant improvements in the near term in China and Russia, as well as other emerging markets. We are, nevertheless, encouraged by signs of stabilization throughout Western Europe and we see no break in the momentum of the US market. Given these market conditions, we are announcing a revision to our full-year forecast for this current fiscal year (to be confirmed).

Specifically, we are revising our sales outlook down to 5.3 million units to reflect the current global sales trend, particularly in China, Russia and other emerging markets. At the same time, we are increasing our full year profit guidance, given our expectations of favorable currency movements, raw materials savings and continuing cost efficiencies. Together, these should more than offset the decrease in our volume outlook.

Reflecting these changes, Nissan has filed the following revised full-year forecast with the Tokyo Stock Exchange, using a foreign exchange rate assumption of 115 yen to the dollar and 135 yen to the euro for the fourth quarter. It is based on the equity method for our Chinese joint venture.

  • Net revenue is expected to be 11.15 trillion yen;
  • Our operating profit forecast has been increased by 35 billion to 570 billion yen;
  • Net income is likely to rise by 15 billion to 420 billion yen;
  • Capital expenditure is expected to remain at 525 billion yen;
  • And RD expenses are anticipated to be unchanged at 500 billion yen.

Looking at the change in operating profit from our previous outlook, we anticipate:

  • A positive foreign exchange movement of 55 billion yen;
  • A 25 billion yen negative impact from the decrease in sales volume;
  • And a 5 billion yen improvement in monozukuri and others.



In conclusion, Nissan continues to deliver on its Power 88 strategy despite the challenging macro-economic conditions. Based on our revised outlook, we expect to generate positive free cash flow. And we remain committed to a dividend payment of 33 yen per share for this fiscal year and maintaining a minimum 30% pay-out ratio to net income for the remainder of thePower 88 period.



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