July 28, 2014

FY14 1Q Financial Results
Nissan Motor Co., Ltd.
Joji Tagawa, Corporate Vice President

Introduction

In the first quarter, demand in North America continued to rise and we began to see signs of recovery in Western Europe. This helped offset the impact of the consumption tax increase in Japan, which led to some softening in the market there. Emerging markets also continued to be volatile during the period. In this environment, we are continuing to execute our Nissan Power 88 midterm plan and profitably grow our business.

As explained last fiscal year, Nissan is required to report earnings under the equity accounting method for our joint venture in China.

Based on that method, for the three months ending June 30, 2014, consolidated net revenues increased 10.4% to 2.466 trillion yen. Operating profit totaled 122.6 billion yen, which equates to an operating margin of 5%. Net income increased to 112.1 billion yen, which represents a 4.5% net margin. Free cash flow for the automotive business was 3.3 billion yen and we ended the period with an automotive net cash position of 916.3 billion yen.

The true measure of our corporate performance includes the proportionate consolidation of our China joint venture operation and is the basis for our Power 88 midterm plan objectives. Therefore, when I discuss the financial results, I will show both the equity accounting and management pro forma methods.

Before going through the financial results in more detail, I will briefly outline some of the business highlights and our sales performance for the period.

Q1 14 Business update

Nissan continued to make solid progress in the quarter.

For example, in the key markets of the US, Japan and Europe, the combined sales of the new Rogue, X-Trail and Qashqai are up 20%, compared to last year. These are the first models to use the Common Module Family development approach, which was co-developed by Nissan and Renault and demonstrate the benefits coming from the Alliance. Together, these models have won almost 20 awards since the start of the year.

Just as we are realizing the success of our new products, Nissan is now benefiting from the significant plant investments made during the first half of the Power 88 plan.

New production volume is coming on stream in the fourth largest automotive market in the world. In April, we officially opened the new plant in Resende, Brazil.

In May, we also opened our second plant in Indonesia. And earlier this month, we opened a second plant in Thailand to create a production and export hub for the NP300 Navara, Nissan’s next generation pickup truck.

We also continue to make progress with our zero emission strategy. The Nissan LEAF is the world’s best-selling EV with more than a 124 thousand units sold since its introduction. In June, we unveiled our second EV, the e-NV200, a zero-emission commercial vehicle. The e-NV200 further reinforces Nissan’s commitment to zero-emission and our global leadership in this growing area.

We remain committed to developing the charging infrastructure, which we believe is the key to improving EV penetration. You may recall in November last year, Nissan and three other Japanese automakers announced plans to financially assist installers of charging stations. In May, we created a new company, Nippon Charge Service, to promote the installation of EV chargers across Japan.

In the US, Nissan LEAF drivers are now enjoying free charging at eligible public stations, thanks to Nissan’s “No Charge to Charge” program, which is now live in 11 markets. Nissan also plans to support the installation of an additional 500 quick chargers in key LEAF markets.

Our zero emission strategy has been recognized globally and contributed to our ranking in the prestigious Interbrand Best Global Green Brands report. Nissan improved its ranking one position to fourth in 2014.

We also took steps to increase our brand awareness globally. Just two weeks ago, Nissan announced a global partnership positioning the company as the Official Automotive Partner of City Football Group. This partnership gives Nissan exposure to a number of key markets and a worldwide fan base.

During the quarter, we revealed the first Datsun for South Africa. This month, we also began production of Datsun on-DO, a new family sedan designed and engineered specifically for Russia. With these moves, Datsun is now fully launched in its four key markets of India, Indonesia, Russia and South Africa.

I mentioned earlier that we have continued to benefit from the Renault-Nissan Alliance with the Common Module Families.

We are also pursuing further synergies from the Alliance, which totaled €2.9bn in 2013. Last fiscal year, we announced a new convergence plan with Renault in Purchasing, Research & Development, Manufacturing and Logistics, and Human Resources, which we expect to generate synergies of at least €4.3bn in 2016.

Meanwhile, our strategic cooperation with Daimler has continued to evolve. This was demonstrated by the recent inauguration of the Infiniti Decherd Powertrain Plant, which will produce engines in Tennessee for the European versions of the Infiniti Q50 sports sedan and the Mercedes-Benz C-Class.

Last month, the companies announced that they will jointly produce premium compact vehicles in Mexico for both Infiniti and Mercedes-Benz. Production for Infiniti will start in 2017 and Mercedes-Benz will start in 2018.

I will now turn to our sales and financial performance for the financial period.

FY14 1Q sales performance

While overall global industry volumes increased 2.7% to 21.69 million units, Nissan’s total retail volume was up 6% at 1.24 million units in the first quarter with strong sales in North America, China and Europe. This offset some sluggishness in Japan and continued volatility in emerging markets.

Looking across the regions…

In Japan, our volume was slightly down by 0.5% to 134 thousand units. The increase in Japan’s consumption tax earlier this year pulled forward some new car orders. However, we have been encouraged by healthy demand for the X-Trail and DAYZ ROOX, which improved our market share by 0.1% to 11.5%.

In China, where our sales performance is measured on a calendar year basis, Nissan’s sales increased by 21.1% to 283 thousand units in the first three months to March 31st. Our overall market share in China during this period was 5%, which was an improvement of 0.5% from last year.

Turning to North America: in the US, our sales grew 14.1% to 350 thousand units, out-performing the overall market and lifting our market share from 7.4% to 7.9%. This strong performance was due mainly to higher demand for the Rogue and Altima. In Canada, sales increased 28.2% to 32 thousand units. Sales in Mexico were slightly down to 64 thousand units. However, Nissan continues to be the market leader with a market share of 25.6%.

In Europe, trading conditions showed signs of stabilizing despite intense price competition. Nissan’s sales increased 13.3% to 171 thousand units. Nissan held its position in the important UK market and as a result, increased its market share from 3.2% to 3.4% in Europe excluding Russia. In Russia, sales increased 31.2% to 39 thousand units, resulting in a market share of 6.1%, an improvement of 2% from last year.

In other markets – including ASEAN, Africa and South America –sales volume increased slightly by 0.8% to 206 thousand units. Asia & Oceania saw a 6.2% sales increase to 90.2 thousand units. Sales in the Middle East were up 10.9% to 52.7 thousand units. The increase in the above markets was partially offset by the 12.6% decline in sales in Latin America.

FY14 Q1 financial performance

I will now go through our overall financial performance for the period.

Under the China JV equity accounting basis, consolidated net revenues increased 232.7 billion yen to 2.466 trillion yen, primarily driven by the increase in volume and FX.

Operating profit totaled 122.6 billion yen.
Net income was 112.1 billion yen.

Looking at the operating profit movement in detail:

• Purchasing cost reduction efforts and higher raw material costs resulted in net savings of 41.5 billion yen.
• Volume and mix produced a positive impact of 28.9 billion yen.
• The increase in selling expenses resulted in a 25.9 billion yen negative movement.
• R&D and manufacturing expenses increased by 9.0 billion yen.
• Recall and Warranty expenses increased by 1.6 billion yen.
• Other items had a negative impact of 19.4 billion yen.

Nissan continued to enjoy a solid automotive net cash position of 916.3 billion yen. Although this represents a seasonal decline from the 1 trillion yen at the end of the fiscal year 2013, it is 293 billion yen above the net cash position of 622.9 billion yen that we reported at the same point in fiscal 2013.

I would now like to outline the key financial metrics on a management pro-forma basis, which includes the proportionate consolidation of our China JV results. For the first quarter, net revenues increased 179.7 billion yen to 2.692 trillion yen. Operating profit increased 38 billion yen to 155.8 billion yen, resulting in a 5.8% operating profit margin, an increase of 1.1 percentage points from the prior year. Net income increased 30.1 billion yen to 112.1 billion yen.

Conclusion

Based on our first quarter performance and outlook for the remainder of the year, we are maintaining our previously announced full year guidance and we continue to project a full year dividend of 33 yen per share.

In conclusion, I would like to reaffirm that Nissan remains committed to deliver the Power 88 objectives.

Now, I would be pleased to take your questions.

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