April 26, 2004
NISSAN 180 and Fiscal Year 2003 Review
April 26, 2004
President and CEO
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.
For fiscal year 2003, Nissan is reporting record earnings and an operating
profit margin that continues to lead the global automotive industry.
And, 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 opportunities.
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
In Japan, 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
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.
Our 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.
In General 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.
In fiscal 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
In 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.
In 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 in
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.
Analyzing the 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
- 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 billion yen.
- For the first time, the impact of higher volumes and mix was the biggest
positive factor in our profit increase, contributing 185 billion yen.
- 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
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 Canton Plant.
- 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 mix.
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
In General 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 billion yen.
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.
Financial costs decreased by 800 million yen to 15.7 billion yen despite the
announced incorporation on the balance sheet of 133.7 billion yen in leases.
As a result, ordinary profit came to 809.7 billion yen, up from 710.1 billion
yen in 2002.
Net 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.
Income before 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%.
Minority interests 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.
Net income 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.
Investing activities 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 2004.
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.
Foreign exchange rates produced a negative impact of 126.9 billion yen to cash
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 yen.
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 expenditures.
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 vehicles.
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
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
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 2004.
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.
In 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 cars.
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
For 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.
In fiscal 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 180.
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
As 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 Nissan.
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 income.
Part III: Outline of NISSAN Value-Up
As NISSAN 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.
The 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.
The first 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.
This 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.
Our 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.
This volume 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 globally.
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.
Finally, the 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
The 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.
One 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 Japanese public.
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.
In the 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
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 sales company.
Finally, India and Pakistan will also provide new opportunities.
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 those markets.
We are working on other breakthroughs in the broad field of customer
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.
The 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.
The 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 profitability.
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 time.
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 the industry.
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.
For 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
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
Thank you for your attention.
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