February 09, 2010

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

For the first nine months of fiscal year 2009, Nissan's consolidated net revenues were 5.379 trillion yen, 19.5% lower than the year-ago level. Operating profit increased 147.6% from the prior year to 228.9 billion yen.
Net income was also positive at 54 billion yen, a 25% increase from the nine-month result in fiscal year 2008.
Free cash flow for the auto business was a positive 226.3 billion yen.
Nissan's recovery efforts have been effective, and the extraordinary measures put in place in response to the global financial and economic crisis are still in effect. Our performance to date in fiscal year 2009 is encouraging, but, given the uncertainty that still exists in the global economy and the deterioration in most of the mature auto markets, it is too early to claim that all is well. We are proceeding with discipline and caution.

FY09 third-quarter sales performance
Year to date, Nissan's global sales were 2.505 million units, down 4.8% from the prior year. In the third quarter alone, global sales totaled 882,000 units, up 20.6% from the same period in fiscal 2008. The increase was due to strong growth in China, where sale were up 71.6% compared to the year-ago level, and to recovery in most of the mature markets.
During the first nine months, we launched six new models globally. In the third quarter, the Fuga luxury sedan and Roox minicar went on sale in Japan, and the 370Z Roadster was launched in the United States.
Describing sales performance by region, the total industry volume in Japan decreased 2.6%, to 3.4 million units, in the first nine months. Our sales decreased 3%, to 423,000 units. In the third quarter, our domestic sales increased 16.7%, to 138,100 units, due to sales of Serena, X-TRAIL, Tiida and Note. The Serena became the top-selling minivan in Japan for the third consecutive year, and the X-TRAIL was the top-selling SUV for the second year in a row. Nissan's market share remained stable, at 12.5%.
In the United States, the total industry volume dropped 14.9%, to 8.2 million units, and our sales declined 12.7% to 595,000 units. In the third quarter, our sales increased 14.6%, to 189,800 units, due to sales of Maxima, Versa, Sentra and truck models. For the first nine months, our U.S. market share remained stable, at 7.2%.
In Mexico, our sales were down 24.5%, to 117,000 units, but Nissan regained its place as the automaker with the highest market share in the country, at 20.9% in calendar year 2009.
In Europe, the total industry volume decreased 9.8%, to 14 million units. Nissan's sales declined 7.6%, to 385,000 units. Due to additional sales volume related to various government scrap incentives, our sales in Western Europe increased 28.4% over the first nine months and rose sharply in the third quarter, specifically, up 73.1%. Our European gains were tempered by the 62% drop in sales in Russia, from 116,000 units a year ago to 44,000 units in fiscal year 2009. Overall, our European market share remained flat, at 2.7%.
In China, our sales increased 35.2%, to 541,000 units. Within that total, sales of Nissan- and Infiniti-branded vehicles rose 47.2%, to 391,000 units. Nissan sales rose 38.7%, to 755,500 units in the January-to-December period, and we launched the NT 400 Cabstar in October. Despite our volume gains, our market share remained stable. In segments where we compete, we did not have enough capacity to meet demand as the segments expanded. There was also expansion in segments where we had no presence.
In other markets, including Asia, Africa, South America and the Middle East, our sales volume decreased 20.4%, to 380,000 units. In the Middle East, our sales for the first nine months were down 33.7%, to 122,600 units, although the rate of decline slowed to 21% in the third quarter. In Australia, sales decreased 7.6%, to 40,400 units. Positive volume growth occurred in Thailand, where sales were up 47.9% in the third quarter, and up 11.3% for the first nine months, to 25,100 units.

Financial results
Compared to the prior year, we saw a substantial increase in revenues in the third quarter while our recovery efforts continued to emphasize lower spending. This combination contributed to our exceptionally strong results.
Consolidated net revenues decreased 19.5%, to 5 trillion 379.6 billion yen. The decline in volume and mix accounted for a negative impact of 12%, and foreign exchange had a negative impact of 7%.
Consolidated operating profit totaled a positive 228.9 billion yen.
Net income was also positive, at 54.0 billion yen.
Explaining the operating profit variance analysis:

  • The 168.3 billion yen negative impact from foreign exchange came from the appreciation of the yen against all currencies.
  • The net impact from purchasing cost reduction was a positive 154.5 billion yen. This amount included a positive impact from the decrease in raw material and energy costs by 51.4 billion yen.
  • Volume and mix produced a negative impact of 126.2 billion yen as a result of the decrease in global sales volume. However, the third quarter of fiscal 2009 was positive by 128.0 billion yen due to the volume recovery in most countries.
  • The reduction in Marketing and Sales expense was a positive 65.8 billion yen due to savings in fixed expenses, such as advertising.
  • The provisions for the residual risk on leased vehicles in North America resulted in a positive variance of 106.5 billion yen, including gains on disposal because of improved used-car prices in our lease portfolio.
  • R&D costs decreased 59.9 billion yen.
  • The remaining variance was a positive 44.2 billion yen, due mainly to savings in fixed expenses for all areas, including manufacturing costs and G&A expenses.

The discipline of our recovery plan efforts is reflected in our production and inventory volumes.
For the third quarter, global production volume totaled 907,000 units, approaching the pre-crisis inventory level at the fiscal 2008 midyear point. Our flexible production network responded quickly to adjust production volumes in line with demand.
Due to careful inventory management, our inventory of new vehicles remains at a low level, at 490,000 units at the end of calendar year 2009. We continue to manage inventory carefully to limit its impact on our free cash flow.

FY09 outlook
Going forward, we remain cautious about the full-year environment.
Our performance in the third quarter was exceptionally positive due, in part, to higher volumes and lower spending, but that situation will change in the fourth quarter. We had reduced R&D spending as part of our recovery countermeasures, but we will increase R&D funding, which is important for our future. We also anticipate risk associated with higher raw material prices.
We expect our full-year global sales to reach 3.48 million units, a 2% increase from last year. Our production volume will be 3.287 million units for the full fiscal year 2009, a 6.6% increase from last year.
Based on these assumptions, we are revising our full-year financial forecast for fiscal year 2009, using a foreign-exchange-rate assumption for the fourth quarter of 87 yen to the dollar and 130 yen to the euro:

  • Net revenues are expected to be 7 trillion 400 billion yen.
  • Operating profit is expected to be 290 billion yen.
  • Net income is expected to be 35 billion yen.
  • R&D expenses will amount to 395 billion yen.
  • Capital expenditures are expected to be 300 billion yen.

Comparing the results in fiscal year 2008, our operating profit forecast is expected to be better than last year's performance by 427.9 billion yen - from negative 137.9 billion yen to 290 billion yen - due to several factors:

  • The impact from foreign exchange was a negative 185 billion yen, with the U.S. dollar and Russian ruble accounting for the majority of this variance.
  • Volume and mix produced a positive impact of 20 billion yen as a result of the recovery in global sales volume.
  • The net impact from purchasing cost reduction was a positive 220 billion yen, which included a positive impact from the decrease in raw material and energy costs.
  • The reduction of Marketing and Sales expenses was a positive 30 billion yen due to savings in fixed expenses, and we will plan to spend more in the fourth quarter than we did during the same period last year.
  • The provisions for the residual risk on leased vehicles in North America resulted in a positive variance of 140 billion yen, due mainly to the booking of provisions for lower used-car prices in our lease portfolio last year. We do not anticipate this positive impact in the next fiscal year.
  • R&D costs decreased 50 billion yen.
  • Sales financing contributed a positive 45 billion yen.
  • The remaining variance was a positive 107.9 billion yen, due mainly to savings of G&A expenses and manufacturing costs as well as a profit recovery from affiliate companies, such as JATCO and Calsonic Kansei.

For the full fiscal year 2009, we expect better results than what we anticipated when we forecast an operating profit of 120 billion yen at the midyear results announcement. The increase is attributed to several factors:

  • The positive impact from foreign exchange is expected to be 15 billion yen, due mainly to the yen depreciation against the U.S. dollar, from 85 yen to 88 yen in the second half.
  • Volume and mix contribute a positive variance of 100 billion yen due to the higher sales volume in major countries.
  • The net impact from purchasing cost reduction is also positive, at 40 billion yen. This is due to less impact from distressed suppliers, given higher production volumes around the world.
  • The impact from reduction of Marketing and Sales expenses will be slightly smaller than we anticipated, due mainly to higher sales volumes.
  • The provisions for the residual risk on leased vehicles in North America will result in a better variance of 10 billion yen, due mainly to improved used-car prices.
  • Sales financing will be improved by 5 billion yen.
  • Others, including G&A expenses and manufacturing costs, will produce a positive variance of 10 billion yen.

Business updates
Nissan is managing through the financial crisis with resilience and effectiveness, and we continue to adapt our operations to market conditions during this period of economic recession. We are controlling costs aggressively, and we are executing our key strategies in a systematic manner. We are well positioned to compete in segments and in markets that will grow in the future.
Allow me to give you an update on new products and expansion activities unfolding in key markets around the world.

  • Tomorrow, in Europe, we will conduct the global unveiling of the Juke, a sporty, small crossover.
  • On February 13, the global reveal of the all-new Patrol will occur in the Middle East.
  • This month we also start production of the new Patrol at the Nissan Shatai Kyushu Plant in Japan.
  • In March, we will launch the first of our global, V-platform compact cars in Thailand.

Looking ahead into fiscal 2010, production will begin in the Renault-Nissan Alliance plant in Chennai, India, and production of V-platform cars will start in China. Nissan's innovative technologies will make news in the second half, beginning with our own hybrid technology in the new Fuga in Japan and followed by the start of sales of the Nissan LEAF electric car and its zero-emission technology in Japan, the United States and Europe.
Our global product strategy is solid. With the launch of global V-platform, the breadth and coverage of our product lineup will be second to none. Nissan will have appealing products in all the major vehicle segments to offer customers in ever-widening sections of society and in some markets where we do not compete today.
And our lineup will be significantly enhanced with the launch of the Nissan LEAF. This breakthrough vehicle is not even on the market yet, but it has already been named one of the "50 Best Inventions of 2009" by TIME Magazine, the "Car of the Year" by Automotive Design & Production Magazine and the "Best Green Car of the Year" by MarketWatch, among others.
We have more than 40 signed agreements with governments and other entities that are eager to promote sustainable mobility.
With our Alliance partner, Renault, we are making investments to build vehicle and battery production capacities and to mass-market them globally.
The momentum is building for zero-emission mobility. We are on the brink of bringing a smart, affordable solution that will benefit our environment and totally change the way people think about cars.
In the field of zero-emission technology, we are leading, and others will follow us.

Our vision for the future is sure, even if the environment in which we operate is not. We hope that 2010 will be a turning point when Nissan's recovery will be complete and growth can resume, but we are not ready to abandon caution. On the short term, the world economy is still uncertain, external factors, such as rising raw material prices, still threaten, and we continue to watch for clear evidence that consumer confidence is returning and that performance can be sustained over many quarters.
For the mid- and long term, we feel confident. Our optimism is based on our clear priorities, our partnership within the Alliance and the preparations we are making for our future with zero-emission vehicles and a stronger presence in emerging markets. When growth resumes, Nissan is well structured and disciplined to move quickly and effectively.
You can expect the best from Nissan.