April 26, 2004
NISSAN 180 and Fiscal Year 2003 Review
April 26, 2004
Nissan Motor Co., Ltd.
Every year since the start of Nissan’s revival, I have reported our
performance for the fiscal year just ended. And every year since the start
of Nissan’s revival in 1999, the reported results exceed the prior year as
well as our forecast.
Today will be no different.
year 2003, Nissan is reporting record earnings and an operating profit
margin that continues to lead the global automotive industry.
as in years past, the numbers will tell our story. Despite the fact that
many of our anticipated risks materialized last year, we consistently
executed NISSAN 180 and realized many of the foreseen
As we begin the final year of NISSAN 180, I will
review our business performance in fiscal year 2003 and give you our
forecast for this year. Today’s disclosure is final. I will then give you
the highlights of our next three-year plan, which we will start
implementing one year from now in April 2005.
Part I: Review of FY03
Let me begin with an
update on our sales.
Global sales came to 3,057,000 units, which
exceeded our forecast of 3,040,000 units. This represents an increase of
10.4%, or 287,000 units, over fiscal year 2002 and the first time in 13
years that Nissan has sold more than 3 million vehicles.
sales came to 837,000 units, a 2.6% increase, in a flat market. The March
and the Cube contributed to this increase, ranking among the top 10
best-sellers every month. Our market share increased 0.3 percent, to
14.2%, including minicars.
In the United States, sales rose 17.9%
to 856,000 units in a market that grew by 1%.
The Nissan Division
grew by 16.1% with a richer mix. High-margin trucks rose 34.1%, driven by
the Murano and the products from our Canton Plant, most of which are still
in the early roll-out phase. Meanwhile, car sales increased by 6.5%, led
by sales of the Altima and the new Maxima.
The luxury Infiniti
Division had its best year ever, up 29.4%, to 124,000 units. Infiniti
benefited from increased sales of the G35 sedan and coupe as well as the
FX35 and FX45. The first full-sized Infiniti sport utility vehicle, the
QX56, was launched successfully in February.
Our U.S. market share
for the full year came to 5.1%, up from 4.4%. The pace of growth
accelerated in the last quarter of the fiscal year, with our share
reaching 6.1% compared to 4.7% in the last quarter of 2002.
performance in the United States was achieved in a market where incentives
continued to reach new heights. We stayed our course and, as I have said
many times, we did not and will not jeopardize our increasing brand power
for short-term market share gains. Though our incentives did rise slightly
in fiscal year 2003, we remained among the most disciplined with the
Nissan Division while Infiniti recorded the lowest level of incentive
spending among its luxury competitors.
In Europe, sales were up
14.4%, to 542,000 units. With 175,000 new Micras sold in its first full
year, this car is bringing new customers to Nissan. Growing sales of 4x4s,
particularly the X-TRAIL and Pick-up, also contributed.
Overseas Markets, including Mexico and Canada, sales were up 9% to 822,000
units. The X-TRAIL was an important contributor, particularly in
Australia, where sales were up 23.1%. In China, the new, locally produced
Sunny helped our sales increase 30.4% to 101,000 units.
year 2003, we released 10 all-new models globally. We also achieved two
major business developments.
In the United States, Nissan did
something no other automaker has ever tried before. A brand-new plant in a
new state, with new employees, with five all-new products launched on time
within eight months – the Canton, Mississippi Plant now stands as a
benchmark for manufacturing startup achievement in our industry.
China, we launched Dongfeng Motor Co., Ltd. Our investment in the
third-largest car and truck manufacturer in China will grow our business
in both the rapidly expanding passenger car and truck markets.
Taiwan our new company Yulon Nissan Motor will not only allow us to grow
profitably in this market, but it will also support our growing presence
Now I will review our consolidated financial performance
in fiscal year 2003.
Consolidated net revenues
came to 7.429 trillion yen, up 8.8% from last year, mainly due to higher
volume and mix. Movements in foreign exchange rates produced a negative
impact of 111.6 billion yen. Previously announced changes in lease
accounting reduced revenues by 18 billion yen, while changes in the scope
of consolidation reduced revenues by 23 billion yen.
Consolidated operating profit improved by 11.9%
to a record 825 billion yen. 825 billion yen is 10 times the operating
profit that we reported just four years ago. As a percentage of net
revenue, our operating profit margin came to 11.1% – which remains at the
top level among global automakers.
variance between last year’s operating profit and this year’s 825
billion yen, several factors are considered:
By region, operating profits in
Japan came to 352.5 billion yen compared to 390.6 billion
yen last year. The drop is primarily the result of higher R&D
expenses, the negative impact of foreign exchange rates on export sales,
and a decrease in mix in the domestic market.
- The effect of foreign exchange rates produced a 48 billion yen
negative impact for the full year.
- The average value of the dollar dropped 8.8 yen to 113.2 yen,
yielding a negative impact of 101 billion yen.
- The euro rose 13 yen to 131.2 yen, producing a positive impact of
29 billion yen.
- Other currencies made a positive contribution of 24 billion yen.
- The change in lease accounting added 20 billion yen while the change
in the scope of consolidation produced a minor negative impact of 4
- For the first time, the impact of higher volumes and mix was the
biggest positive factor in our profit increase, contributing 185 billion
- Selling expenses increased by 72 billion yen, as forecasted.
- The improvement in purchasing costs amounted to 183 billion yen,
which shows, once again, the critical importance of having a competitive
cost base and effective relations with suppliers.
- Product enrichment and the cost of regulations had a negative impact
of 83 billion yen.
- We spent an additional 54 billion yen in R&D to further
reinforce product and technology development.
- Manufacturing and logistics costs had a negative impact of 12
billion yen, including the costs associated with the startup of our
- Finally, general and administrative and other expenses increased by
27.3 billion yen.
Profitability in the
United States and Canada came to 351.8 billion yen
compared to 242 billion yen in fiscal year 2002. This significant increase
is due to improvements in both volume and
Europe’s operating profit level more than
doubled, to 49.2 billion yen from 21.9 billion yen. The rise is due to the
increase in volume and favorable exchange rates.
Overseas Markets, operating profits came to 66 billion yen
compared to 77.6 billion yen. The decrease is due to lower profits in
Mexico as a result of the decline in Sentra exports to the United States.
Finally, inter-regional eliminations came to 5.4
Net non-operating expenses totaled
15.2 billion yen – 12 billion less than last year. As planned, the return
of the substitute portion of the pension plan to the government decreased
our expenses by 10 billion yen.
decreased by 800 million yen to 15.7 billion yen despite the announced
incorporation on the balance sheet of 133.7 billion yen in
As a result, ordinary profit came to 809.7
billion yen, up from 710.1 billion yen in 2002.
extraordinary losses grew by 57.7 billion yen, mainly due to the
fact that last year’s numbers included a one-time gain of 56.3 billion yen
from the sale of our Murayama Plant.
taxes came to 736.5 billion yen. Taxes came to 219 billion yen
for an effective consolidated tax rate of 29.7%. This year we expect a
consolidated tax rate of 34%.
amounted to 13.8 billion yen compared to 700 million yen in fiscal year
2002 due to the increase in profits of companies that are fully
consolidated but not fully owned.
reached 503.7 billion yen.
As disclosed last year, the inclusion of
our Canton Plant and lease liabilities increased net automotive
indebtedness to a total of 268.3 billion yen. In fiscal year
2003, cash from operations totaled 1.042 trillion yen, a 245 billion yen
improvement over last year.
totaled 428 billion yen – including 52.7 billion yen of our investment
into Dongfeng. The balance of the payment, amounting to 61.5 billion yen,
will occur in the first quarter of fiscal year
Finance activities totaled 232.8 billion
yen. This includes 92.3 billion yen for the purchase of treasury stock,
74.6 billion yen for the payment of dividends and 65.9 billion yen for the
repayment of maturing debts and lease obligations.
exchange rates produced a negative impact of 126.9 billion yen to
As a result, net automotive debt at new
accounting standards totaled 13.6 billion yen at the close of fiscal year
2003, well ahead of our forecast of less than 150 billion
Capital expenditures increased 49 billion yen
to 427 billion yen, representing 5.8% of net revenue. This is the third
year in a row with a double-digit increase in capital
In R&D, we spent 354.3 billion
yen – an increase of 54 billion yen – to fund new technologies and product
development. This included increased expenses for hybrid and fuel cell
Despite these significantly higher expenditures to
prepare for the future, we were able to eliminate more than 250 billion
yen in automotive debt.
Our investments are made within the strict
guidelines of our ROIC. We exceeded our targeted 20% return on
invested capital, reaching a record 21.3% for fiscal year
The ratio of working capital to net revenue has improved,
dropping to 3.6% from 5.8% in 2002, through tighter control of accounts
payable, receivables and inventory.
As previously announced, we
will propose a 19 yen per share full-year dividend to our shareholders at
the annual general meeting on June 23.
Part II: Outlook for FY04
As we begin the final
year of NISSAN 180, I would like to review our outlook for fiscal year
Assuming a total industry volume of 58.8 million units
globally – which is 1.7% above fiscal year 2003 – Nissan’s sales are
forecast to come to 3,380,000 units, a 10.5% increase over 2003.
Japan, our sales objective is 870,000 units, a 4%
increase over last year, based on a flat total industry volume assumption
of 5.8 million units. To support that achievement, we will launch six
all-new models, including the Murano, a luxury sedan and four compact
In the United States, our sales objective is
1 million units, an increase of 16.8%, based on a flat total industry
volume assumption of 16.9 million units. This would be the first time
Nissan reaches the 1 million sales mark in the United States and will be
supported by the launches of the all-new Pathfinder, Frontier, Xterra and
the Infiniti M45.
In Europe, our sales objective
is 538,000 units, a level that is basically the same as last year, since
no new models are planned. Our objective is based on a relatively flat
total industry volume assumption of 19.4 million units.
General Overseas Markets, including Mexico and Canada,
our sales objective is 972,000 units, up 18.2%… and including, for the
first time, 96,000 Dongfeng light commercial vehicles. The heavy- and
medium-duty trucks and buses of Dongfeng – representing 179,000 units in
2004 – will not be consolidated in our sales figures in order to keep the
integrity of NISSAN 180’s 1 million additional sales.
year 2004, we will launch nine all-new vehicles around the world, leading
to 20 regional product events. Since most of these models are planned to
be launched in the second half of the fiscal year, you can expect sales to
accelerate toward the end of this year and through September 2005, when we
will measure the sales of all the new products launched during NISSAN
By the end of this fiscal year, we forecast that we will have
achieved 783,000 of the 1 million additional sales committed during NISSAN
180, which we fully expect to deliver.
The new fiscal year will
bring risks and opportunities. Risks include adverse foreign exchange rate
fluctuations and rising commodity prices and interest rates. We consider
our greatest opportunities to lie in the accelerated implementation of all
our action plans during the final year of NISSAN 180.
In light of
all these factors, we have filed the following forecast with the Tokyo
Stock Exchange, using a foreign exchange rate assumption for the year of
105 yen per dollar and 125 yen per euro.
The exchange rate
forecast that we are making today will significantly dampen our operating
profit potential for fiscal year 2004 by 130 billion yen. Despite this
assumption, we will improve our financial performance further, a clear
sign of the potential that still exists in Nissan.
- Net revenue is forecasted to be 8.176 trillion yen, up 10.1%. ú
Operating profit is expected to be 860 billion yen, up 4.3% from fiscal
year 2003, giving an operating profit margin of 10.5%.
- Ordinary profit is expected to reach 846 billion yen.
- Net income is forecasted to be 510 billion yen.
- Capital expenditures will be 480 billion yen.
- ROIC is expected to remain above 20%.
To put this
forecast in perspective, if we were to use the same exchange rates that
existed in fiscal year 2003, today I would be forecasting operating profit
of 990 billion yen and an operating margin of around 11.6%.
Nissan grows globally, we will continue to increase our investments and
take management control of key businesses. In fiscal year 2004 we will
consolidate Yulon Nissan Motor, Nissan Motor Light Truck Company and Siam
We will proportionally consolidate our 50% stake in Dongfeng
Motor Co., Ltd. From Dongfeng, after consolidation adjustments we expect
an additional 250 billion yen in revenue and 20 billion yen in operating
Part III: Outline of NISSAN Value-Up
180 enters into its final year, the time has come to share the main
drivers of the plan that will be implemented during the three years from
fiscal year 2005 through 2007.
Under the Nissan Revival plan and
NISSAN 180, Nissan has consistently created value in the global automotive
industry. Our market cap has grown from 1.2 trillion yen on March 31,
1999, to 5.3 trillion yen at the close of fiscal year 2003. We believe
there is a tremendous amount of value still to be delivered. Value
creation is what Nissan is all about.
Our new three-year plan,
which is named NISSAN Value-Up, will be just as ambitious as the plans it
follows. The name “NISSAN Value-Up” is simple and has a single, universal
meaning, and each of its commitments is measurable over time.
plan – the details of which we will unveil as we start implementation in
April 2005 – has three critical commitments relating to growth, sustained
profitability and return on investment.
commitment of NISSAN Value-Up is to reach annual global sales of
4.2 million units by the end of the plan in fiscal year 2007.
commitment represents an increase of 820,000 units over fiscal year 2004,
our reference year, and slightly higher than the amount of growth in the
three years of NISSAN 180. The additional 820,000 units in sales will come
from all regions in the world. As an indicative guide, driven by China,
General Overseas Markets should contribute 350,000... United States and
Canada, 250,000... Japan, 150,000... and Europe, 70,000 additional sales.
By the end of NISSAN Value-Up, our three main country markets will be the
United States at over 1.2 million units... Japan, over 1 million units…
and China, over 500,000 units.
We have made a relatively
conservative assumption for total industry volumes globally, which we have
forecasted to be 60 million units. All of that growth is expected to come
from General Overseas Markets, and most of it from China.
sales growth has been robust under NISSAN 180 and will remain so under
NISSAN Value-Up. But if you look at our global market share, which is a
consequence of growth, our performance has been even more remarkable. In
2001, we were at 4.7% market share. In 2003, we reached 5.3%. With the
total industry volume forecast of NISSAN Value-Up, we should reach 7% in
2007. This means that we are growing on our own merit, driven by our
competitive products and not only by expanding markets.
growth will be supported by a steady stream of new products. During NISSAN
Value-Up, we will deliver 28 all-new models, the same high pace as under
NISSAN 180. As we renew many current models, we will also introduce seven
new models that will be completely innovative in their concept and
benefits. Also, we will expand the geographic reach of many of our models.
For example, the next Cube and the next Skyline GT-R will be sold
The second critical commitment of NISSAN
Value-Up is to maintain the top-level operating profit margin in our
industry, which today means a double-digit margin.
third commitment is to maintain return on invested
capital at or above 20%.
As we did with NISSAN 180, we will
communicate a three-year dividend policy for NISSAN Value-Up to our
shareholders when we meet on June 23. Management’s fiduciary
responsibility to shareholders is to provide visibility of earnings to
support the share price and to propose a globally competitive dividend
payout policy. NISSAN Value-Up will deliver on both counts.
proposals to support NISSAN Value-Up were developed by 14 strategic task
teams. Several breakthroughs were selected to grow the top line while
maximizing the bottom line. A breakthrough proposal is one that breaks
with Nissan’s current business organization, way of management or
delivered performance, requiring a complete change in mindset and
Let me give you some examples.
breakthrough is that our Infiniti luxury brand is going
global as a tier-1 luxury brand. Since its establishment in 1989, Infiniti
has primarily competed in the United States, steadily building its
identity as a brand that offers customers distinctly modern,
high-performance products and personalized, progressive services.
Infiniti’s recent performance demonstrates that the brand is now capable
of competing in the global luxury market.
Infiniti today accounts
for 4% of Nissan’s global volume, 8% of our total revenue and 12% of our
consolidated operating profit.
Last month in Seoul we established
Nissan Korea Company, where Infiniti sales will begin in mid-2005. During
NISSAN Value-Up, Infiniti will be introduced in Japan, China, Russia and,
at a later stage, Western Europe.
In Japan, we will reorganize our
distribution network to take into account the introduction of a clearly
distinct Infiniti channel. We will also clarify our current Red and Blue
Stage distribution channel system in order to be more appealing to the
A second breakthrough is
significant geographic expansion. Since 1999, we have invested in our
General Overseas Markets to fuel growth.
In China, our joint
venture with Dong Feng was a breakthrough during NISSAN 180, but
substantial growth will be realized during NISSAN Value-Up.
ASEAN trade area, Thailand will become a strategic regional base of
operations, now that it has been fully consolidated and is under Nissan’s
In the Middle East, we have committed 10 new
products to the market, including an expanding Infiniti lineup. Nissan’s
presence in Egypt will be significantly expanded, where we will take over
and develop an existing manufacturing plant to support sales in that
market and in neighboring countries.
We will turn our attention to
the entire African continent, where our presence today is small and
concentrated in South Africa.
In Russia, we will significantly
expand the scale of our operations from our newly established national
Finally, India and Pakistan will also provide new
A third breakthrough focuses on
sourcing parts and services from Leading Competitive Countries. The vast
majority of our sourcing has been with traditional suppliers based in
Japan, North America, or Europe. With most of the future growth of Nissan
coming from China and General Overseas Markets, cost competitiveness and
effective supplier relations will be a key driver of growth and profits in
We are working on other breakthroughs in the broad
field of customer satisfaction.
Finally, we see potential for a
breakthrough in the field of Light Commercial Vehicles. LCVs represent a
growing segment in global markets, but nowhere did we have the necessary
focus or the proper organization to support this business until now.
Earlier this month we established the Light Commercial Vehicle Business
Unit, which will focus on the manufacture and sale of light-duty trucks
globally, with a special emphasis on Japan, China and Europe.
numbers alone make a compelling case for increased attention. Of the 72
models Nissan sells globally, 20 of them – or 28% – are light commercial
vehicles, but they only represent 7% of our sales volume and less than 4%
of our operating profits.
Nissan Revival Plan was about establishing a solid base for the company
and investing for the future. NISSAN 180 is about profitable growth.
NISSAN Value-Up will continue the growth and maintain
It’s not just a margin story. It’s not just a growth
story. It’s both. It’s another shift in conventional wisdom in our
industry. It is possible to grow and sustain profits at the same
Each time we set objectives for Nissan, the reaction is that
they are unattainable, and as we have consistently met them, the
perception is perhaps that they were easy. However, the results speak for
themselves, and today Nissan remains at the top level of profitability in
As CEO, my involvement in the elaboration of NISSAN
Value-Up has been as intense as it was for the Nissan Revival Plan and
NISSAN 180. Even though I will be called to take on additional
responsibilities as Renault’s CEO during NISSAN Value-Up, I will remain
fully accountable for delivering the commitments made today. Do not expect
me to be a part-time CEO but, rather, a full CEO with two hats.
now – and for the years to come – I simply remind you of one fact. The
direction we started in 1999 is ongoing. Our dream was to deliver
profitable growth that would make Nissan a major global automaker in
alliance with Renault.
As we mark the fifth anniversary of the
Alliance, our vision has not changed. The growth we are experiencing has
been thoughtfully planned and boldly executed. Nissan is indisputably
creating significant value. For society. For our employees. For our
shareholders. And for our customers.
With every new model – such as
the Tiida we introduced earlier today – we aim to deliver our very best.
The women and men of Nissan have already shown what they are capable of.
With their renewed pride and dedication, Nissan will continue to delight
and enrich people’s lives. Nissan is moving swiftly and decisively in the
right direction, and we will keep value going firmly up.
for your attention.
# # #