8th of February, 2013
Fiscal Year 2012 3rd Quarter Financial Results
NISSAN MOTOR CO., LTD.
Joji Tagawa, Corporate Vice President
Despite significant and, in some cases, historic economic and political challenges - Nissan Motor Company's operational, financial, and market performance has been positive. The company has posted its 15th consecutive quarter of operating profit. Our balance sheet is sound. And even in the face of a range of difficult conditions -which today include the weak European economy, strained relations between Japan and China which negatively impacts Japanese automakers, and our difficult new model start-ups and challenging sales condition in the US - we have demonstrated our continued ability to successfully navigate times of difficulty and uncertainty.
However, I do want to note that, in some areas, we have come up short of the performance goals we hoped to reach by this quarter. And while we are not yet satisfied, we continue to adhere to Nissan Power 88 - our mid-term strategy for sustainable profitability and increased market share that takes us through 2016. Without question, we are benefiting from this approach - and from the talents of a dynamic workforce; an ongoing focus on scale, synergy, flexibility; and forward-thinking investments in technology, product, and process.
Now, let me get to the financials.
Key Performance Indicators: Financial Results
For the nine months ending December 31st of 2012, Nissan is reporting consolidated net revenues of 6 trillion 755.2 billion yen and operating profit of 349.2 billion yen, which equates to an operating margin of 5.2%, and net income of 232.4 billion yen, which represents a 3.4% net margin. Free cash flow for the auto business was a negative 282.3 billion yen, but we remain in a net cash position of 333.8 billion yen.
These results have been achieved against a backdrop of numerous unfavorable market trends - including negative growth trends across Europe, and signs of slowing growth in China, along with the specific challenges resulting from the Japan - China island issue.
Nissan Power 88
As I said earlier, given the current macro-economic environment, we are not yet where we want to be. We know where we need to go - and we have an aggressive, comprehensive strategy in place to get there. Most of you have heard details of the plan, so I won't review those today, but let me discuss specific elements of our performance.
FY12 Business Update
Before going through the financial results in greater detail, I will outline some of the operational highlights of the third quarter of fiscal year 2012. This time period has been characterized by continued progress and positive strategic announcements - as well as positive recognition for our breakthrough innovations and award-winning products.
In November, the Nissan Note bested an impressive pool of competitors to be crowned the RJC Car of the Year for 2013 by the Automotive Researchers' and Journalists' Conference of Japan. As you may recall, the Nissan LEAF received this recognition the year before.
At last year's China automobile overall awards ceremony, the new Sylphy was named "Car of the Year" and VENUCIA R50 took home the award for "most economical vehicle." Both of these models were built and sold by our joint venture in China. Despite the difficult selling environment in China during the last quarter, December sales of the Sylphy were about 12,000 units reaching 10% of the C segment share.
These award-winning vehicles are just a few of the innovative new models that have been launched since the start of this fiscal year - in Japan, China, the United States, Thailand, India, and Indonesia - as part of our global product offensive.
In the area of Zero Emission, Nissan continues to lead the industry. We recently sold our 50,000th Nissan LEAF and we continue to develop and roll out new technologies and updated products.
In November, we announced the release in Japan of the new-generation LEAF, which has an improved range, a more affordable price, and a variety of new enhancements and equipment. And last month, we ramped up assembly of the 2013 model year, all-electric LEAF at our manufacturing plant in Smyrna, Tennessee -- where it will be manufactured alongside our gasoline-powered products. Adding the electric vehicle to the Smyrna manufacturing facility required only a few process changes, such as the addition of quality confirmation specifically for electric vehicles and special training for technicians.
Infiniti's aim to reach premium brand status continues to gain momentum. Infiniti is expanding rapidly across the globe. This fiscal year we initiated sales in Singapore, Chile, Dominican Republic, South Africa and Australia. We look forward to adding Hong Kong to this list in fiscal year 2013. And, as we announced in November, starting in 2014, Infiniti plans to begin sales of its range of sedans and cross-overs in Brazil.
In November, Infiniti and Red Bull Racing -- the three-time FIA Formula One Constructors' World Champion -- announced a comprehensive extension of their partnership, which was originally established in March 2011. Beginning with the 2013 Formula One season, Infiniti will serve as Red Bull Racing's major technical partner, with the team name changing to INFINITI RED BULL RACING.
In December, Infiniti announced that it will manufacture its first premium compact car at Nissan's award-winning production base in Sunderland, United Kingdom.
Other exciting developments include the introduction of the new Q50 sports sedan, which was unveiled at the Detroit Motor Show last month.
Monozukuri Enhancement in ASEAN
Our recent production efforts have left us increasingly well positioned for future growth.
In November, we announced plans to invest 11 billion baht or 29 billion yen for a second assembly plant in Thailand. Scheduled to start production in August 2014, the new plant will support our growth strategy in the ASEAN region and will complement the existing Nissan Motor Thailand facility. The new plant will have an initial annual production capacity of 75,000 units and will expand up to 150,000 units. With two plants in operation, total production capacity in Thailand will expand to 370,000 units by fiscal year 2016.
And earlier this week, we announced expansion plans for our R&D activities in Thailand, Nissan Technical Center South East Asia, to accelerate our growth in the ASEAN region. With this step - and by expanding both staff and facilities in the region - we will be better equipped to respond to the customer needs in ASEAN, meet local market requirements, and continue to offer a range of competitive Nissan products in the region.
Let me take a minute to address the situation in China. - Without question, we've confronted some unanticipated challenges this fiscal year. Like other Japanese auto makers, Nissan has been impacted by the recent political conditions - and demonstrations - in China. At the height of the demonstrations last fall, showroom traffic dropped significantly - but, as of January, it has normalized and is exceeding last year's levels. In addition, our Huadu and Zhengzhou plants have returned to two shifts of operation.
During calendar year 2012, sales in China totaled 1.181 million units - which were in line with the forecast we issued in November. And January sales reached 115,700 units, an increase of 22.2% above January 2012 sales.
As you may have seen, last month, we agreed to transfer the medium and heavy commercial vehicle business unit to Dongfeng Motor Group. This will allow us to focus attention and resources on our core business of passenger and light commercial vehicles. This sale will result in a financial gain and cash generation that will allow us to reinvest in the core business.
Alliance/Strategic Partnership Updates
Before I get into the specific performance numbers, I want to provide a brief update on our alliance strategy.
The Renault-Nissan Alliance continues to deliver valuable synergies - allowing us to leverage investments, reduce costs, and maximize efficiencies. I'm pleased to report that this Alliance sold a record 8.1 million vehicles in calendar year 2012, which represents one in 10 new cars sold worldwide.
In December, the Renault-Nissan Alliance created a new joint venture, allowing us to establish a strategic partnership with AVTOVAZ - Russia's largest carmaker and owner of the LADA brand. The goal is to accelerate growth for all three brands - Renault, Nissan and LADA -- in the Russian market. Renault-Nissan already sells more than one in three cars in Russia. This is a fast-growing market, and together with AVTOVAZ, the Alliance aims to have a market share of at least 40%.
And just two weeks ago we released details regarding a third evolving alliance between Nissan, Daimler and Ford. The companies signed a unique agreement to accelerate the commercialization of fuel cell electric vehicle technology. The goal of the collaboration is to jointly develop a common fuel cell electric vehicle system, while reducing the high investment costs associated with the engineering of the technology. Each company will contribute equally toward the project. This strategy will allow us to maximize design commonality, leverage volume, create new efficiencies, and - ultimately - to help to launch the world's first affordable, mass-market fuel cell electric vehicles -- as early as 2017.
FY12 YTD Sales Performance
Now I will walk you through our overall performance since the start of fiscal year 2012 - starting with the unit sales numbers globally, and then by region.
For the nine months ending December 31st, overall global industry volumes increased 6% to 59.09 million units. Nissan's overall sales results were up 6% at 3 million 635 thousand units.
LOOKING ACROSS THE REGIONS...
In Japan, Total Industry Volume - or TIV - increased 20.1%, to 3.68 million units. Retail volume increased 1%, while our market share decreased 2.2 points to 11.8%.
In China, TIV increased 5.5% to 13.3 million units. Nissan's sales increased by 4.5% to 947,000 units. The Tiida, Sunny and QASHQAI were the main contributors to our sales growth. In the October-to-December period, sales decreased 31.2% - which we attribute to the impact of the island issue.
Turning to North America. In the U.S., TIV increased 13.4% to 11.02 million units. Nissan's sales volume increased 8.2% to 819,000 units - driven by demand for the Rogue and Pathfinder.
Meanwhile, in Canada, sales were down 8% to 61,000 units. In Mexico, Nissan maintained its strong market share position at 24.5%, with sales of 184,000 units for the period.
In Europe, TIV decreased 6% to 12.97 million units. Sales volumes decreased by 6.7% to 479,000 units, and our market share maintained by 3.7%. The Juke and QASHQAI series models were our top sales contributors. In Russia, sales increased 1.5% to 118,000 units, though market share decreased to 5.1%.
In other markets - including Africa, Latin America and the ASEAN region - our sales volume was up 22.1% to 709,000 units. Of those markets, in Asia and Oceania, sales increased 33.3% to 321,000 units. Breaking down these gains: in Thailand, sales increased 96.3% to 96,500 units; in Indonesia, sales increased 16.2% to 51,600 units; and in India, sales increased 77.2% to 30,500 units.
In Latin America, sales were up by 8.5% to 173,800 units, with a particularly strong performance in Brazil where sales rose by 44% to 77,400 units. Sales in the Middle East also increased, up 26.3% to 132,100 units.
FY12 9-month Consolidated Financial Performance
I will now go through our overall financial performance for the first three quarters of FY12.
FY12 Financial Performance (9 months)
Consolidated net revenues increased 56.8 billion yen, to 6.7552 trillion yen.
Consolidated operating profit totaled 349.2 billion yen, yielding a 5.2% operating margin.
Net income was 232.4 billion yen, giving a net margin of 3.4%.
Operating Profit Variance Analysis
Operating profit was adversely impacted as negative foreign exchange movements, raw material costs, selling expenses and other factors outweighed positive contributions from our purchasing cost reduction efforts. Looking at these movements in detail:
- The 13.0 billion yen negative impact from foreign exchange came mainly from negative movements in the Russian Ruble and Brazilian Real.
- The increase in energy and raw material costs was a negative 16.2 billion yen.
- Purchasing cost reduction efforts resulted in a saving of 141.1 billion yen.
- Volume and mix produced a positive impact of 8.7 billion yen.
- The increase in selling expenses resulted in a 65.1 billion yen negative movement.
- R&D expenses increased by 45.0 billion yen.
- Manufacturing expenses increased by 29.7 billion yen.
- Sales financing profit decreased by 6.8 billion yen.
- Other items, which included an increase in G&A and warranty costs, resulted in a negative impact of 52.6 billion yen.
Net Cash (Auto Business)
At the end of the period, our automotive net cash position was 333.8 billion yen.
FY12 Outlook Reconfirmation - Maintain full year income guidance
We are maintaining our full year guidance for income. We are now in the full ramp up of our product portfolio in the US and we expect to gain momentum in the US, as well as the other markets going forward. Combined with the yen correction and our disciplined cost management, positive factors are offsetting the negative factors, which include the competitive environment in pricing and sales evolution, higher than anticipated recovery costs in China and further weakening of the European market.
Nissan Power 88
In conclusion, I would like to emphasize that we are committed to our outlook for FY2012, and although we are not yet where we want to be at this point in the development of the mid-term plan, we are committed to Power 88 and to overcoming the challenges we face.
We will continue to focus on cost efficiency, free cash flow generation, sound balance sheet management, and maintaining our ability to react quickly to unexpected challenges. Beyond this, we will remain committed to new technology development, new and attractive product introductions, further market expansion, and innovative alliances. In each of these areas, Nissan's management is determined to deliver results with both creative passion and financial discipline.
# # #