SPEECHES

July 26, 2018

Fiscal Year 2018 First-quarter Financial Results
Nissan Motor Co., Ltd.
Joji Tagawa, Corporate Vice President

For the first quarter of fiscal year 2018, the increase in sales volume in “other markets” (comprising the regions of Asia & Oceania, Latin America, Middle East and Africa & Others), as well as our purchasing cost reduction efforts, offset the negative impact caused by the decline in unit sales in the US, where we continue to enhance the quality of sales, and the increase in R&D investment. However, it was not enough to offset the negative impact caused by rising commodity prices, which have been increasing since fiscal year 2017, and foreign exchange headwinds. As a result, revenue and operating profit decreased for the quarter.

For the three-month period ending June 30, consolidated net revenues were 2.72 trillion yen and operating profit totaled 109.1 billion yen, which equates to an operating margin of 4.0%. Net income was 115.8 billion yen, which represents a 4.3% net margin. Free cash flow for the automotive business was a negative 31.5 billion yen, and we ended the period with an automotive net cash position of 1.55 trillion yen.

FY18 FIRST QUARTER SALES PERFORMANCE

Turning to our sales performance for the three months ending June 30, global total industry volume – or TIV – rose 4% to 24.13 million units. Nissan’s sales volume decreased in North America and Europe and increased in regions including China, the Middle East and Latin America, where we are performing well. However, our total unit sales decreased 3% to 1.31 million units. As a result, our market share fell 0.4 percentage points to 5.4%.

Looking at our key markets in detail...

In Japan, TIV decreased 1% to 1.19 million units. Nissan’s sales decreased 0.8% to 130,000 units, resulting in a stable market share of 10.9%.
Strong demand for registered vehicles, including Serena with e-POWER, which was introduced this past February, and the new Nissan LEAF, which went on sale last year, lifted sales, whereas Kei car sales declined due to the timing of new model changes. This resulted in a slight decrease in retail sales, which was in line with the market trends.

In China, where our sales performance is measured on a calendar-year basis, TIV from January through March was up 2.3% to 6.79 million units. Nissan’s sales increased 6.9% to 336,000 units, representing a market share of 5.0%, an increase of 0.3 percentage points from the comparable period in the prior year. The growth was driven by strong sales of Nissan models including the Kicks, a new model for the China line-up, as well as the all-new Navara, X-Trail, and Teana. Furthermore, the Venucia D60, which was introduced in China this year, contributed to the continued growth of the Venucia brand.
As China is reported with a three-month lag, we also have the sales figures for the Q2 period. TIV increased 8.2% to 6.44 million units. Our sales rose 14.3% to 384,000 units, resulting in a market share of 6.0%, an increase of 0.4 percentage points. For the six-month period to the end of June, TIV increased 5.1%, while our sales significantly outperformed the market and increased 10.7% to 720,000 units. As a result, our market share increased 0.2 percentage points to 5.4%.
Going forward, the new Terra, a frame-based SUV launched in April, is expected to contribute to our growth for the remainder of the fiscal year.

In the US, TIV increased 1.8% to 4.5 million units. Nissan’s sales declined 9.5% to 365,000 units, equivalent to a market share of 8.1%. We continue to work on normalizing sales and improving dealer inventory levels. In the months ahead, the new Infiniti QX50 and Kicks will enhance the model cycle, along with the new Altima, which will go on sale in autumn. We will continue our efforts to implement operational improvements toward the second half of this fiscal year.
In Canada, Nissan’s unit sales were up 3.4% to 43,000 units. Market share was 7.0%.
In Mexico, Nissan’s sales decreased 15.7% to 74,000 units, while we maintained our number-one position with a market share of 21.6%.

In Europe, including Russia, Nissan’s sales totaled 162,000 units, a decrease of 12.7%. Excluding Russia, Nissan’s sales decreased 14.4% to 139,000 units, representing a market share of 2.9%. This is primarily due to the decline in sales volume in the UK, where Nissan has a strong presence, and the focus on profitability including the reduction of fleet sales.
In Russia, our sales decreased 0.6% to 23,000 units, equivalent to a market share of 5.0%.

In other markets, Nissan’s sales increased 6.6% to 200,000 units.
Unit sales in Asia and Oceania decreased 7.4% to 76,000 units. Sales in Latin America, where there is a strong demand for Kicks, were up 26.4% to 55,000 units. While the industry continues to decline in the Middle East, our unit sales increased 4.0% to 44,000 units. Sales in Africa and others rose by 26.3% to 25,000 units.

FY18 FIRST QUARTER FINANCIAL PERFORMANCE

Moving to our financial results, as with previous quarters, Nissan is representing its financial performance under the equity accounting method for our joint venture in China.

On this basis:

  • Consolidated net revenues totaled 2.72 trillion yen.
  • Operating profit totaled 109.1 billion yen, which equates to an operating margin of 4.0%.
  • Ordinary profit, which includes the performance of affiliated companies such as the joint venture in China, was 158.9 billion yen.
  • Net income was 115.8 billion yen, which represents a 4.3% margin.

Looking at the operating profit movement:

  • Foreign exchange had a negative impact of 19.3 billion yen, and the increase in raw material prices resulted in a negative impact of 27.0 billion yen. Excluding these two external factors, our operating profit was nearly flat year-on-year, with an increase of 2.1 billion yen.
  • Regarding the company’s performance, the negative impact caused by the decrease in sales volume, particularly in the US, and the increase in investments for the future, including R&D and manufacturing expenses, was offset by positive factors, including cost items such as purchasing cost reduction efforts and product enrichment, increase in sales volume in other markets, as well as a decrease in marketing and selling expenses. If we look at volume & mix and marketing & selling expenses by region, the US was negative by 40 billion yen and other regions was positive by 23 billion yen.

On a management pro forma basis, which includes the proportionate consolidation of our Chinese joint venture, our key indicators showed that:

  • Net revenues totaled 3.03 trillion yen.
  • Operating profit was 154.4 billion yen, which equates to an operating margin of 5.1%.
  • Net income totaled 115.8 billion yen.
  • Automotive free cash flow was a negative 15.4 billion yen.
  • We ended the period with automotive net cash position of 1.81 trillion yen.

In summary, our results for the quarter were unfavorable, as we faced a number of challenges, including the decline in sales in North America and Europe, an increase in commodity prices, and foreign exchange headwinds.

Nissan remains focused on enhancing the quality of sales, particularly in the US, and maintaining strict cost discipline globally in order to increase profitability. We are also determined to address the issues that came to light in Japan since last year. Nissan will continue to reinforce compliance fully across the board and restore customer confidence.

For the full fiscal year, we are maintaining our previous guidance and continue to project a full-year dividend of 57 yen per share, a 7.5% increase from the prior year.

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