November 04, 2009

Fiscal Year 2009 First Half Results
Press conference
Toshiyuki Shiga, Chief Operating Officer, Nissan Motor Co., Ltd.

At the start of this fiscal year, in the wake of an unprecedented financial crisis and in the midst of widespread economic recession, we forecast that all global automakers would face serious threats, including market instability and foreign exchange rate volatility.
In this severe environment, the results from Nissan's performance in the first half of fiscal year 2009 show that our company's recovery is off to a good start, but it is not yet complete.
Our performance was aided by external factors, such as increased sales in China and by scrapping incentives in Japan, the United States and Europe. We also benefited from our internal efforts to improve performance in every function. Nissan employees worldwide have fully mobilized to support our company's recovery plan, and I wish to recognize and thank them for their motivated performance.
For the first half of fiscal year 2009, Nissan's consolidated net revenues fell 30.5%, and operating profit decreased 50.5%. Even so, this performance is better than our forecast and indicates that Nissan is moving in the right direction.

FY09 first-half sales performance
The global total industry volume declined 9.3% in the first half of fiscal year 2009. The automotive market is in recession in most of the mature markets. China showed a volume increase, with sales up 22.5% compared to the year-ago level.
For the first half, Nissan sales totaled 1.623 million units, a 14.6% decrease compared with the same period last year. In the first half, we launched the PIXO city car in Europe, the NV200 Vanette light commercial vehicle in Japan and the G37 Convertible in North America.
In Japan, the TIV dropped 10%, to 2.2 million units for the first half. Our sales decreased 10.3%, to 285,000 units. Nissan's market share remained stable, at 13.1%, thanks to Nissan ECO Series models, such as Serena and Note, which benefited from the tax scheme for eco-friendly vehicles.
In the United States, our first-half sales volume decreased to 406,000 units, a 21.4% drop in volume in line with the 21.9% drop in the TIV. Our market share remained stable, at 7.2%. Thanks to our fuel-efficient lineup, our share was higher among consumers who participated in the $3 billion Car Allowance Rebate System program offered by the U.S. government; in fact, 8.7% of consumers participating in the CARS program chose Nissan models as their new cars.
In Europe, the total industry volume decreased 14.7%. Our sales declined 18.5%, to 249,000 units. Our market share declined one-tenth of a percent. Much of the decline is linked to the strong decline in Russia, which fell 64.2%, from 85,800 units to 30,700 units. Excluding Russia, our European share showed a slight increase, from 2.3% last year to 2.5% for the first half. Our sales in Western Europe benefited from the offer of various governments' scrap incentives, which resulted in an 18% sales increase in the second quarter, or a 4.4% increase for the entire first half.
In China, where the TIV increased 22.5% from January to June, to 5.6 million units, our sales increased 19.3%, to 332,000 units. Within that total, sales of Dongfeng passenger vehicles rose 41.3%, to 225,100 units. Nissan sales were boosted by a minor change to the Sylphy passenger sedan. Beyond the first six months, we continued to see significant growth the third quarter of the calendar year. Our sales increased 71.6%, to 209,200 units, from July to September. In response to this strong demand, we introduced a three-shift system at our Huadu plant in Guangzhou in October. The construction project to add additional capacity of 240,000 units in Huadu is on track, and operations will begin in 2012.
In other markets, including Asia, Africa, South America and the Middle East, our sales volume dropped 28.5%, to 238,000 units. Despite some recovery in markets such as India and Brazil, we still have a low presence at these countries. Our big contributor in fiscal 2008 was the Middle East, but this market continues to be in the midst of recovery.

FY09 first-half financial results
Consolidated net revenues decreased 30.5%, to 3 trillion 383.4 billion yen. The decline in volume accounted for a negative impact of 21%, while foreign exchange had a negative impact of 9%.
Consolidated operating profit totaled a positive 94.9 billion yen.
Net income was also positive, at 9 billion yen.
Explaining the operating profit variance analysis:

• The 142.7 billion yen negative impact from foreign exchange came from the appreciation of the yen against all currencies. By currency, the U.S. dollar, Canadian dollar, Australian dollar and Russian ruble accounted for the majority of the variance.
• The net impact of purchasing cost reduction was a positive 86.2 billion yen, which included a positive impact from the decrease in raw material and energy costs by 21.3 billion yen.
• Volume and mix produced a negative impact of 254.2 billion yen, resulting from the decrease in global sales volume. The negative impact for the second quarter of fiscal 2009 was 102.4 billion yen, which was improved from a negative 151.8 billion yen in the first quarter of fiscal 2009.
• The reduction in Marketing and Sales expenses was positive by 81.1 billion yen due to savings in fixed expenses such as advertising.
• In the first half of fiscal year 2008, we had to increase provisions for residual risk on leased vehicles in North America by 63 billion yen. In this half, we did not book additional provision because of improved used-car prices for our lease portfolio, which explains the positive variance of 73.6 billion yen.
• R&D cost decreased 42 billion yen. This was in line with our initial projection of savings of 55.5 billion yen in FY09 compared with FY08.
• The remaining variance was a positive 17.3 billion yen, due mainly to savings of fixed expenses in all areas, including manufacturing cost and G&A expenses.

FY09 recovery plan progress
Nissan's recovery plan is on track. We continue to watch global economic trends and market situations closely and stand ready to adjust our business plan and direction as needed.
At the end of fiscal year 2008, we managed production carefully to adjust to the drop in global sales, producing 520,000 units in the fourth quarter. In the first quarter of fiscal 2009 and again in the second quarter, our production volumes have increased in line with increasing demand. In the second quarter, our plants produced 803,000 units. In response to opportunities presented by various incentive programs around the world, our flexible production system has been able to adapt to each region's specific timing and model requests to support sales.
At the end of the first half, our inventory volume remained low, at 410,000 units, even though our production volume in the second quarter increased by 29% compared to the first quarter of fiscal 2009.
Our latest forecast of our inventory volume at the end of fiscal 2009 shows an increase from the current level, but we will continue to manage inventory carefully to limit its impact on our free cash flow.

FY09 outlook
Nissan's recovery plan results and our ability to maintain positive free cash flow and profitability during a recessionary period are positive indicators, but we remain cautious about the full-year environment.
In fiscal year 2009, risks include foreign exchange, a rebound in raw material prices, distressed suppliers and further deterioration of the TIV, especially as government incentive programs are winding down in key markets. Opportunities include foreign exchange, the potential for continuing growth in China, and ongoing synergies we are developing with Renault.
Taking into account all these factors, we are revising our forecast for the full fiscal year.
We expect our global sales to reach 3.3 million units, a decrease of 3.3% from last year. With a TIV assumption of 58 million units, a 5.9% decrease year-on-year, our global market share is expected to be 5.7%.
To meet demand, we plan to increase our global production volume to 3.17 million units, a 2.8% increase from the prior year.
We have filed our revised full-year forecast with the Tokyo Stock Exchange, using a foreign-exchange-rate assumption of 85 yen to the dollar and 130 yen to the euro for the second half.

• Net revenues are expected to be 7 trillion yen.
• Operating profit is expected to be 120 billion yen.
• Net loss is expected to be 40 billion yen.
• R&D expenses will amount to 395 billion yen.
• Capital expenditures are expected to be 325 billion yen.

Explaining the operating profit variance analysis compared with last year:

• The 200 billion yen negative impact is from foreign exchange. The additional negative impact in the second half is due mainly to the appreciation of the yen against the U.S. dollar.
• Volume and mix produced a negative impact of 80 billion yen.
• The net impact of purchasing cost reduction is a positive 180 billion yen.
• The reduction in Marketing and Sales expenses is a positive 40 billion yen.
• The positive variance from provisions for residual risks is expected to be 130 billion yen.
• R&D cost decreased 50 billion yen.
• Sales financing contributed a positive 40 billion yen.
• The remaining variance is a positive 97.9 billion yen, due mainly to savings of G&A expenses and manufacturing costs.

Future priorities
We expect the headwinds facing our industry will continue to be severe, but we will continue to prepare for our future as we address current issues. Nissan's sustainable growth will be supported by plans that address major evolutions occurring in our industry.
One is the launch of our global compact cars - affordable, fuel-efficient models for a larger section of society. To satisfy the fast-growing demand for affordable mobility, we are bringing a family of global compact cars over the three years following launch: a hatchback, a sedan and a compact multi-purpose vehicle.
Based on our all-new V-platform, these cars are designed for global efficiency with local optimization. The first model in this fuel-efficient, low-emission lineup will be produced in Thailand in March 2010, followed by the production start at our new plant in Chennai, India, in May 2010. A few months later, in mid-2010, production will start in China.
At full ramp-up, when our global compact is sold in more than 150 countries, we expect annual sales of one million units.
Another important priority is our zero-emission leadership strategy, which includes electric vehicles and fuel cell vehicles. As we approach the production launch of the Nissan LEAF in the fall of 2010, we will be involved in the entire life cycle of both the vehicle and its battery, from start to finish.
Two weeks ago, at the opening of the Tokyo Motor Show, we introduced the first three planned models in our lineup and a fourth concept in development. In addition to LEAF, we will bring an electric version of Nissan's Light Commercial Vehicle based on the NV200 and an Infiniti compact luxury car. The LandGlider concept represents our fourth vehicle, a compact with a unique suspension that allows the cabin and all four wheels to tilt through cornering.
We will begin accepting reservations for the world's first affordable electric car - Nissan LEAF - in early 2010 in Japan, the United States and Europe, with market introductions to follow in late 2010. We will be ready for mass marketing to begin in 2012.
With Sumitomo Corporation, we are planning a business to reuse, resell, refabricate and recycle the batteries, giving them a second life as energy-storage solutions in markets worldwide.
By being in control of all the core zero-emission technologies and by investing for mass marketing with our Alliance partner, Renault, we are confident of our strategy to achieve zero-emission leadership in the global auto industry.

Our performance in the first half of fiscal 2009 is encouraging, but the full-year environment remains volatile and uncertain. Despite all our motivated efforts and disciplined actions, we are operating in a situation that is still critical.
We are on track, and our commitment stands firm. We are managing our way through this recession. We are eagerly working on key priorities that will create meaningful value for our customers, for our shareholders and for our environment and that will certainly be important to Nissan's future.

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