November 2, 2011

Fiscal Year 2011 First-half Financial Results
Media Conference
Toshiyuki Shiga, Chief Operating Officer, Nissan Motor Co., Ltd.

Nissan's operational, financial and market performance for the first half has been encouraging. In terms of our key performance indicators, we have delivered solid results- particularly given the volatile global macro-economic environment and the pressures from an appreciating yen.
For the first half of fiscal year 2011, Nissan is reporting consolidated net revenues of 4 trillion 367.4 billion yen and operating profit of 309.7 billion yen, which equates to an operating margin of 7.1%, and net income of 183.4 billion yen, which represents a 4.2% net margin. Free cash flow for the auto business totaled a positive 160.4 billion yen and we remain in a net cash position of 320.4 billion yen.
In October we resumed full and unrestricted production in Japan, a challenging self-imposed target which underlines our strong recovery from the earthquake of March 11.
We are confident in our ability to overcome such challenges to our business, which we react to with discipline and speed. Currently, we are monitoring the flood conditions in Thailand to minimize the potential impact on our operations - while obviously offering all necessary support to the affected areas.
As we look forward to the second half of this fiscal year, we remain confident in Nissan's ability to deliver improved retail volumes and solid revenues despite challenging market conditions.
We will deliver significant profits, reflecting continued operational momentum and financial discipline, although the impact of the strong yen will continue to impact our full-year fiscal 2011 forecasts.
Before going through the financial results in more detail I will outline some of the operational highlights of the period.

FY11 business update
First I want to update you on the continued positive momentum of our operations in the first half, which have been embodied by a number of strategic announcements. In June, we launched Nissan Power 88, which is a six-year business plan to accelerate the company's growth across new markets and segments. Under the plan, Nissan unveiled its ambitious goals to increase its corporate operating profit to a sustainable 8 per cent as soon as possible and attain a global market share of 8 per cent by 2016.
During the first half, we have made progress on initiatives that will enable us to make Nissan Power 88 a reality.
Among many product announcements, we have accelerated the roll out of the V-platform sedan launch. The success of this launch has seen average monthly sales in China exceed 12,000 units since its launch in January. Sales in the US . achieved the top position in its segment in September immediately after its introduction. And in Thailand, it is now recognized as the first sedan eco car.
Another important components of the mid-term plan is sustainable mobility. We have already set a new standard for electric vehicles with the successful launch of the Nissan LEAF. Our zero-emission initiative - which is an essential part of our Alliance strategy with Renault - remains on track, and the LEAF has become the most popular electric vehicle in the industry. With 15,000 units delivered to customers through September, it is now the highest selling EV in the world. And the latest evolution of this program involves "LEAF to home", which will enable electricity to be supplied from Nissan LEAFs to ordinary households. This system will add further value to our zero-emission initiative.
Despite the challenges posed by the strong yen, we continue to implement various initiatives to balance the currency exposure. The new company, Nissan Motor Kyushu will help us to maintain our manufacturing cost competitiveness in Japan. A major task for this new company is to work on enhancing the efficiency of parts procurement and logistics. Operations will optimize the regional strengths of Kyushu and deepen collaboration with Asia, such as China and South Korea.
Nissan remains committed to emerging markets and the recent announcement of a new plant in Rio de Janeiro state underlines our focus on growth regions.
Another highlight of the period has been the continued benefits of our partnerships, dominated by the Renault-Nissan Alliance. In the latest Alliance contribution to Nissan, we will adopt Renault's, state-of-the-art 1.6-liter diesel engine for Qashqai, our best-selling model in Europe, and another Renault-designed diesel engine, which will be produced in India, for the locally built Micra.
Benefits are also emerging in other partnerships, such as with Ashok Leyland in India, Daimler and Mitsubishi. Through our joint venture with Ashok Leyland, we began production on our first price-entry commercial vehicle - the DOST -in the second quarter. We have also made further progress over the period with our strategic cooperation with Daimler in engine supply. Furthermore, together with Mitsubishi, we commenced operations on the development of minicars through our joint venture.
Lastly, we recently signaled a new phase in our sustainability strategy with the Nissan Green Program 2016. As one of the largest 50 companies in the world by revenues we understand our responsibilities to society and the environment. The 2016 program represents an environmental mid-term plan - complementing Nissan Power 88. The latest environmental program is focused on reducing our carbon footprint through the expansion of zero-emission vehicles and the introduction of diverse green technologies that deliver industry-leading fuel efficiency. The program also aims to increase the use of renewable energies and adopt closed-loop recycling.
Having summarized some of our operational highlights, I will now go through our overall performance for the first half in detail, starting with the unit sales numbers across our operating regions.

FY11 first-half unit sales performance
Overall global industry volumes increased 3.7% to 37.34 million units. Nissan's overall sales were up 10.7% at 2.225 million units in the first half - resulting in a 0.4 percentage point increase in the group's global market share to 6%. In each market, we out-performed the industry's overall volume trends, which is an encouraging sign.
Looking across the regions...
In Japan, the Total Industry Volume - or TIV - decreased 23.7%, to 1.94 million as volumes were adversely affected by the March earthquake. Our responsiveness and ability to resume production meant we were able to contain the retail volume decline at Nissan to 14% in the first half, while our market share rose 1.7 percentage points to 14.6%. Strong sales of the Serena, which achieved the number one position in its class, contributed to our share gains in the first half.
In China, the TIV over the period increased 4.3% to 8.56 million units. Nissan's sales increased 18.2%, to 595,000 units. The Sunny, QASHQAI and Tiida models were the main contributors to our sales growth. In the July-to-September period, our sales continued to show positive momentum, increasing 24.1% to 312,500 units and improving our market share by 1.2 points to 7.8%.
Turning to North America; In the US, the TIV increased 6.3% to 6.46 million units. Nissan's sales volume once again out-performed the market by increasing 9.7% to 489,000 units. Nissan LEAF also contributed to this growth with total sales of 6,700 units. Although product availability was impacted by the earthquake, market share improved three tenths of a percent to 7.6%. In Canada, sales were up 0.2% to 47,300 units. In Mexico, Nissan improved on its strong market share position to 25.2%, with sales of 105,800 units for the period.
In Europe, the TIV increased 5.1% to 9.34 million units. Nissan's sales rose 22.6% to 339,000 units in the period, and our market share increased 0.5 points to 3.6%. The Juke and QASHQAI series models were our top sales contributors. Among the market highlights, Nissan's sales in Russia increased 61.8% to 69,000 units, and our market share rose to 4.9%.
In other markets - including ASEAN, Africa and South America - our sales volume was up 13.9% to 366,000 units - with strong double digit growth in the important markets of Brazil, Thailand, Indonesia and India all signaling good prospects for the future.

FY11 first-half financial performance
I will now go through our overall financial performance for the period. Consolidated net revenues increased 48.3 billion yen, to 4.3674 trillion yen, primarily driven by the increase in volumes, which offset the negative foreign exchange impact.
Consolidated operating profit totaled 309.7 billion yen, yielding a 7.1% operating margin.
Net income was 183.4 billion yen, giving a net margin of 4.2%.
Operating profit declined marginally compared to the first half of fiscal year 2010 as negative foreign exchange fluctuations and raw material costs outweighed positive contributions from the increase in volumes and our purchasing cost reduction efforts. Looking at these movements in detail:

  • The 105.7 billion yen negative impact from foreign exchange came mainly from the appreciation of the yen against the U.S. dollar. Excluding this impact, operating profit margin would have been 9.0%.
  • The increase in energy and raw material costs was a negative 73.3 billion yen.
  • Purchasing cost reduction efforts resulted in a saving of 100.9 billion yen.
  • Volume and mix produced a positive impact of 29.1 billion yen.
  • The increase in selling expenses resulted in a 38.8 billion yen negative movement.
  • R&D costs decreased by 7.8 billion yen.
  • Sales financing was a positive 31.0 billion yen.
  • Other items, which included a decrease in warranty costs, produced a positive impact of 23.8 billion yen.

At the end of the period, our net automotive debt continued to be in a net cash position of 320.4 billion yen. If the yen had remained at the exchange rates that existed at the start of this fiscal year, our cash position would have been 408 billion yen.

FY11 outlook
On June 23, we announced a forecast for fiscal year 2011. Our first half results indicate that Nissan is continuing to deliver vehicles around the world that meet customer demand, enabling us to deliver a significant operating profit. Despite volatile economic conditions, we expect Nissan retail volumes to reach 4.75 million units, up 3.3% compared to the previous forecast announced in June.
Following the flood in Thailand, Nissan is preparing to resume production partly from November 14th due to our efforts to obtain substitute parts. We are taking various efforts with employees in Japan and Thailand working together in order to resume full-fledged production as soon as possible. At the moment, there hasn't been an impact on production in other regions aside from Thailand and we will continue to work hard to minimize such risk.
Due to the volume forecasts and our anticipated efficiencies for the remainder of the year, we have filed a revised full-year forecast with the Tokyo Stock Exchange, using a foreign exchange rate assumption of 80 yen to the dollar and 110 yen to the euro for the second half.

  • Net revenue is expected to be 9.45 trillion yen;
  • Operating profit is expected to be 510 billion yen;
  • Net income is forecast to be 290 billion yen;
  • Capital expenditures are expected to reach 410 billon yen;
  • R&D expenses will amount to 440 billion yen.

As we analyze the variance in forecast operating profit to the previous forecast, the company expects:

  • A negative foreign exchange impact of 20 billion yen;
  • We see a modest increased contribution of 45 billion yen in improved volume and mix;
  • Selling expenses are expected to rise by 14 billion yen;
  • Sales finance is expected to amount to a positive 30 billion yen;
  • And other items are expected to be a positive 9 billion yen.

Consistent with the dividend plan we announced in June, an interim dividend of 10 yen will be paid this month.

Clearly Nissan faces a number of risks in the second half, but we also see significant opportunities ahead. The risks are derived mainly from continued foreign exchange difficulties, the flooding in Thailand and general signs of global economic slowing.
We remain confident about our underlying operating performance, reflecting the continued hard work of our employees around the world; the continued strong demand for our vehicles and early signs of meeting the ambitious plans outlined in Nissan Power 88.
The first half performance has been solid. We have grown sales in most of our global markets both mature and emerging. And we have delivered that growth while remaining disciplined in our cost controls.
We recovered production levels to pre-earthquake levels, while continuing activities to offset the appreciation of the yen. Nissan remains focused on emerging markets, as evidenced by our recently announced investment in a new plant in Rio de Janeiro. Nissan LEAF became the world's single largest-selling electric vehicle. Nissan is on track toward zero emission leadership.
And lastly, we continue to develop our product range with innovative new models and features.
I want to reiterate that the global economic environment remains uncertain. However, Nissan has shown its ability to react quickly to any crisis, as illustrated by our recovery measures during the financial crisis and the earthquake in March.
Despite the current uncertainties, we anticipate growth in the global auto industry for the long term and are well positioned to take advantage of that trend.

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