SPEECHES

July 27, 2016

Fiscal Year 2016 First-quarter Financial Results
Nissan Motor Co., Ltd.
Joji Tagawa, Corporate Vice President

For the First Quarter of FY2016, Nissan is reporting solid financial results despite currency headwinds and continued volatility in the emerging-markets. Healthy demand for our core products in North America and Western Europe and our continued focus on cost efficiencies contributed to improvement in the underlying business performance which has offset most of the negative FX headwinds which have been significant.
For the three month period to June 30th, consolidated net revenues was 2.65 trillion yen. Operating profit totaled 175.8 billion yen, which equates to an operating margin of 6.6%. Net income was 136.4 billion yen, which represents a 5.1% net margin. Free cash flow for the automotive business was 229.4 billion yen and we ended the period with an automotive net cash position of 1.365 trillion yen.
To give you a better picture of the underlying business improvement, this chart provides a comparison of first quarter revenue and operating profit to the comparable year ago period on a constant currency basis (basically assuming the same FX rates as Q1 of FY15 – as shown, on this basis, net revenues increase 3.2% to 2.99 trillion yen while Operating profit improves 37.8% to 267.0 billion yen.

FY16 FIRST QUARTER SALES PERFORMANCE
During the three months ending June 30th, global total industry volumes – or TIV – reached 22.79 million units, an increase of 3.5%.
Nissan’s total unit sales were 1.287 million units, a decrease of 7,000 units, as the effect of the Dayz/Dayz Roox minicar stop-sales in Japan was partially offset by sales increases in other regions.
Looking at our key markets in detail…
In Japan, TIV fell by 1.9% to 1.08 million units. Nissan saw unit sales decline by 25.4% to 90 thousand units, resulting in a market share of 8.3%. Conditions remained challenging, due to the stop-sales of the Dayz and Dayz Roox minicars, as well as continued weakness in consumer confidence and an ageing product line-up. As we move through the balance of the year, we expect to improve our market performance with the restart of Dayz and Dayz Roox sales beginning earlier this month and a refresh of some core models in the current fiscal year, including the all-new fifth generation Serena which is scheduled to go on sale in late August. The new Serena will feature Nissan’s autonomous drive technology, ProPILOT, which can automatically control the accelerator, brakes and steering in single-lane highway driving, in both heavy and flowing traffic.
In China, where our sales performance is measured on a calendar basis, Q1 TIV was up 6.0% to 6.3 million units. Nissan’s sales increased 0.8% to 299 thousand units, representing a market share of 4.7% for the quarter. This reflects continued solid demand for models including the X-Trail, Sylphy and Qashqai.
As China is reported with a 3 month-lag, we also have the sales figures for Q2 (Apr-Jun) - in the Q2 period, TIV increased 10.1% to 6.01M Units and our sales increased 6.7% to 311K units and our market share reached 5.2%. So for the six-month period to the end of June, our China sales reached 610K units which was up 22K units or 3.8% versus the prior year period.
Looking deeper at our 6-month sales performance in China, Nissan’s passenger vehicle sales increased 6.6% to 526,000 units. The growth in passenger vehicle sales was partially offset by lower sales of light commercial vehicles where we saw a decrease in our sales of 11.2% to 84,000 units reflecting general LCV market TIV softness.
In North America, TIV increased by 1.5% to 5.52 million units, and Nissan out-performed the market by delivering record unit sales of 529 thousand units, an increase of 8.9%.
In the U.S., TIV was down 0.2% at 4.56 million units. Nissan’s sales rose by 7.9% to 398 thousand units, equivalent to a market share of 8.7%, amid strong demand for Altima, Rogue and the new Maxima.
In Canada, Nissan reported unit sales up by 7.1% to 39 thousand units, resulting in a market share of 6.7%.
In Mexico, Nissan maintained its number-one position with unit sales increasing 14.6% to 91 thousand units, equivalent to a market share of 24.4%.
In Europe, including Russia, Nissan’s sales were in-line with our plan and totaled 183 thousand units. Excluding Russia, Nissan’s sales rose by 4.7% to 162,000 units, which resulted in a market share of 3.4%. This performance reflected Nissan’s strong position as one of the top Asian brands in Europe and continued demand for models such as the Qashqai, Navara and the Infiniti Q30. Furthermore, we will launch the all-new Micra later in the fiscal year.
In Russia, the market continued to be adversely affected by the weak ruble and economic uncertainty. Nissan’s sales decreased 38.2% to 21,000 units, resulting in a 5.9% market share.
In other markets, Nissan’s sales decreased 8.6% to 186,000 units due to volatile demand and adverse currency movements.
Unit sales in Asia and Oceania decreased 3.7% to 84,000 vehicles, sales in the Middle East were down 11.4% to 44,000 units and sales in Africa and others were down 20.3% to 20,000 units. Although sales in Latin America fell by 8.5% to 38,000 units, Nissan outperformed the market.

FY16 FIRST QUARTER FINANCIAL PERFORMANCE
Moving to our financial results, as with previous quarters, Nissan is presenting its financial performance under the equity accounting method for our joint venture in China.
On this basis:

  • Consolidated net revenues totaled 2.65 trillion yen. 
  • Operating profit totaled 175.8 billion yen, which equates to an operating margin of 6.6%.
  • Net income was 136.4 billion yen, which represents a 5.1% net margin.
  • The shortfall in these metrics versus the prior year’s results is due to the significant negative impacts of year-over-year FX changes which are not completely offset by improved underlying operational performance

Looking at the operating profit movement in detail:

  • Volume and mix produced a positive impact of 19.4 billion yen.
  • The increase in selling expenses resulted in a 34.7 billion yen negative movement.
  • Cost items, including purchasing cost reduction efforts resulted in net savings of 72.9 billion yen.
  • R&D expenses decreased by 7.2 billion yen.
  • Manufacturing expenses increased by 6.3 billion yen.
  • Other items had a positive impact of 14.8 billion yen.
  • On a constant currency basis, operating profit improved 37.8% to 267.0 billion yen.
  • FX however had a negative impact of 91.2 billion yen, resulting in a reported operating profit of 175.8 billion yen.

In terms of net cash, we ended the period with automotive net cash position of 1.365 trillion yen. This represents a decline from the 1.5 trillion yen at the end of the last fiscal year as the positive free cash flow from the automotive business was unable to fully offset the significant translation impact from foreign exchange rate volatility on overseas cash balances as well as dividend payments and stock buybacks in the period.
On a management pro forma basis, which includes the proportional consolidation of our Chinese joint venture, our key indicators showed that:

  • Net revenues totaled 2.89 trillion yen for the quarter.
  • Operating profit was 209.0 billion yen.
  • Net income totaled 136.4 billion yen.
  • Automotive free cash flow was 231.0 billion yen; and
  • We ended the period with automotive net cash of 1.5 trillion yen.

On a pro forma basis, our actual operating profit margin was 7.2%, up by 0.2 percentage points from the prior period.
Again, these results reflect improved underlying business performance which is being somewhat masked by the significant FX headwinds – On a constant currency exchange rate basis, pro-forma net revenues show an increase of 4.3% to 3.26 trillion yen and operating profit improved 38.4% to 304.1 billion yen.

FY16 OUTLOOK
Relative to our financial outlook for the full fiscal year, we are maintaining our previously announced full-year guidance.
We also continue to project a full year dividend of 48 yen per share, a 14.3% increase from the prior year, which is equivalent to dividend yield 4.8%. In addition, the previously announced share buyback program is still underway and we continue to offer an attractive shareholder return policy.

CONCLUSION
In summary, Nissan has delivered solid financial results for the quarter.
Our underlying performance improved significantly in this three-month period, reflecting strong demand for core models in North America, a continuing rebound in Western Europe and our ongoing focus on cost efficiencies.
This helped offset recent unfavorable currency movements and challenging conditions in emerging markets.
We have started the fiscal year with good momentum. Although we face market uncertainty and currency headwinds, we expect to continue to deliver solid earnings and free cash flow generation.

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