July 29, 2009


Fiscal Year 2009 First-quarter Results
Press conference
Toshiyuki Shiga, Chief Operating Officer, Nissan Motor Co., Ltd.

The global economic environment continues to be challenging and filled with uncertainty, and the global automotive industry continues to adapt to market circumstances.
In this context, Nissan is executing its recovery plan in a systematic manner, as planned. As we announced in May, we expect fiscal year 2009 to be a tough year for our financial performance. As we look at key performance indicators for the first quarter, net revenues decreased 35% to 1.5 trillion yen compared to the prior year. Our full-year forecast for operating profit remains a negative 100 billion yen, but we were able to deliver a positive first-quarter operating profit of 11.6 billion yen, exceeding expectations, mainly due to our cost containment efforts throughout the company and favorable currencies compared to our plan. Free cash flow is still negative by 19.5 billion yen in the first quarter, but this amount is much better than the first-quarter result from past years due to a disciplined management of working capital and frugal investment policy.
Our efforts to achieve positive free cash flow by the end of the fiscal year are on track.

FY09 first-quarter sales performance
I begin with global sales.
The global industry volume was down by 16.3%. All major regions except China showed declines of more than 10%. Our sales results were also down by 22.8%.
We launched three new models globally in the first quarter. In Europe, we launched PIXO, an affordable city car with high fuel efficiency and low emissions. In Japan, we launched the all-new light commercial vehicle NV200 Vanette, a next-generation light-duty compact van. In North America, the G37 Convertible joined the Infiniti G line that was included in Car and Driver magazine's "10 Best Cars" in 2009.
Let me give the sales breakdown by region.
In Japan, the TIV dropped 18.5%, to 958,000 units. Our sales dropped 21.6% from the prior year's first quarter, to 116,000 units. Nissan's market share decreased slightly, to 12.1%, despite support from the wide range of Nissan ECO Series models that are benefiting from the new tax scheme for eco-friendly vehicles.
In the United States, our first-quarter sales volume decreased to 173,000 units, a 31.5% drop in volume in line with the 32.1% drop in the TIV. Our market share remained at 6.6%. Two new models - the Infiniti G Convertible and Nissan cube - were launched.
In Europe, our sales were 118,000 units, declining 24.6% from the prior year. Our market share declined two-tenths of a percent in Europe. Our share in the Russian market declined three-tenths of a percent due to the 58.6% decline in our sales. Excluding Russia, our European share was stable, at 2.2%. Demand for the all-new PIXO and QASHQAI continues to be strong, and government scrap incentive schemes are helping sales in Western Europe. Additionally, in June, we started operations at our new vehicle assembly plant in St. Petersburg, Russia.
In China, our sales from January to March increased to 145,000 units, an increase of 9.3%. A cut in the vehicle purchase tax for models with engines below 1.6 liters helped to boost sales of our Tiida, Livina and Sylphy models. China is a growing market, as demonstrated by the significant growth of our sales in the second quarter - a 28.4% increase from April to June. Today we are announcing that we will expand the capacity of our Huadu plant in Guangzhou to add an additional capacity of 240,000 units, for a total capacity of 600,000 units. Operations will begin in 2012.
In other markets, including Asia, Africa, South America and the Middle East, our sales volume dropped 29.8%, to 119,000 units. In the Middle East, our sales declined 34.8%, to 42,400 units. In the South American market, the Livina series of flex-fuel vehicles was introduced.

FY09 first-quarter financial results
Now I will review our financial results for the first quarter of fiscal year 2009.
Consolidated net revenues decreased 35.5%, to 1.5148 trillion yen. The decline in volume accounted for a negative impact of about 27%, while foreign exchange had a negative impact of 8%.
Consolidated operating profit totaled a positive 11.6 billion yen.
Net income was a negative 16.5 billion yen.
Explaining the operating profit variance analysis:

  • The 62.7 billion yen negative impact from foreign exchange came from the appreciation of the yen against all currencies. By currency, the U.S. dollar, Canadian dollar, Australian dollar and Russian ruble accounted for the majority of the variance.
  • The impact of purchasing cost reduction was a positive 29.9 billion yen. The slight negative impact from the increase in raw material and energy costs was offset by a positive contribution from purchasing cost-reduction efforts.
  • Volume and mix produced a negative impact of 151.8 billion yen, resulting from the decrease in global sales volume.
  • The reduction in Marketing and Sales expenses was positive by 34.7 billion yen due to savings in fixed expenses such as advertising.
  • In the first quarter of fiscal year 2008, we had to book 42 billion yen of provisions for residual risk on leased vehicles in North America. In this quarter, we did not book an additional provision because of the stable used-car prices for our lease portfolio, which explains the positive variance of 45 billion yen.
  • R&D costs decreased 14.2 billion yen. This was in line with our initial projection of savings of 55.5 billion yen in FY09 compared to FY08.
  • The remaining variance was a positive 22.4 billion yen, due mainly to savings of fixed expenses in all areas, including manufacturing cost and G&A expenses.

FY09 recovery plan progress
Nissan's recovery plan is not limited to budget items, and it is an evolving plan. We continue to watch closely global economic trends and market situations. We are prepared to react quickly to adjust our business plan and direction.
We monitor the progress of the recovery plan each month, and this slide shows some of our key indicators. Currently, the plan is proceeding according to schedule.
At the end of the first quarter, our inventory volume remained low, at 440,000 units, even though our production volume increased by 19% compared to the fourth quarter of fiscal year 2008.
We are taking extensive measures in fiscal year 2009 to keep our costs in line with the decline in net revenues. Globally, fixed costs, including labor costs, are being reduced by more than 200 billion yen in this fiscal year, and overtime is being reduced by 75%. Travel costs are being cut by 75%. Other recovery measures include a tight control of expense budget allocation, a frugal investment policy and a 20% reduction in fixed Marketing and Sales expenses. All these efforts are making swift contributions to our financial results.

FY09 outlook
Although we are seeing the first positive results from our recovery plan, the full-year environment remains uncertain, and we are operating in a situation that is still critical.
In fiscal year 2009, risks involve foreign exchange, raw material price rebound, distressed suppliers and further deterioration of the TIV, especially as government incentive programs end in key markets. We see opportunities in the China market and in the synergies we are developing with Renault. Given the risks we foresee, it is too early to change our full-year forecast for fiscal year 2009. We are on track to achieve positive free cash flow by the end of this fiscal year.

Future priorities
As we manage our priorities for today, we also continue to work on the priorities that will be important to Nissan's future.
One example is the rollout of our global entry car strategy. We have announced that the successor of the March/Micra, the first model in the global entry car lineup, will be produced in Thailand at the end of this fiscal year. Construction of our new plant in Chennai, India, is on track, and production will start in May 2010. We also plan to produce global entry cars in China, beginning in mid-2010.
Another key priority is our zero-emission leadership strategy, which includes electric vehicles and fuel cell vehicles. Recent actions build the momentum we are creating as we advance toward the launch of vehicle production in the fall of 2010.
  • At our affiliate AESC in Zama, lithium-ion battery production trials have begun.
  • In the United States, Nissan was approved for a $1.6 billion federal loan that will be used to modify the Smyrna Plant to have the capacity to build 150,000 electric cars and 200,000 battery packs a year when production begins in 2012.
  • In Europe, we announced that we will invest more than 400 million euro to build battery plants in the United Kingdom and Portugal.
  • In China, we announced a partnership with the Ministry of Industry and Information Technology for mass-marketing electric cars. To date, the Renault-Nissan Alliance has 27 partnerships with governments and other entities around the world.

We have been working hard to prepare a solid foundation for the mass-marketing of our electric cars. And in just four days, we will celebrate the global debut of our new electric car at the opening of Nissan's new global headquarters.
Just as electric vehicles will mark the start of a new era in automotive history, our new headquarters marks the start of a new era in the life of Nissan. Our global headquarters will be the center of value creation for our company for years to come. From that site, Nissan will nurture innovation and skills to develop innovative products, such as our breakthrough zero-emission vehicles and global entry cars. We will build our brand's presence and strength in mature and emerging markets. And we will work to create greater value for our customers and all our stakeholders.