November 1, 2013
FY13 First-Half Financial Results
Nissan Motor Co., Ltd.
Media Conference Remarks: Carlos Ghosn, CEO
Today we are announcing Nissan's earnings for the first-half of fiscal year 2013, along with a revised sales and financial forecast for the full year.
After describing the results of the six-month period to September 30th I will detail our new forecast for the full fiscal year and the immediate actions being taken to ensure we address the areas of operational softness.
I will take your questions following this presentation. Our detailed first half figures, along with year-on-year comparisons and the earnings outlook, are provided for your reference in the appendix to this presentation.
First, I will give you a summary of our global sales performance in the first half.
Overall global industry volumes increased 3.9% to 41.44 million units. Nissan's corresponding volume was down 1.5% at 2.44 million units, due to continued weakness in Europe and sharper than expected downturns in several emerging markets. This reality offset renewed momentum in North America and an improving performance in Japan.
Looking across the regions...
In Japan our volumes increased 3.6% to 315,000 units. Healthy demand for the Note and strong sales of the new DAYZ minicar contributed to an improved market share at 12.4%. This has been mostly driven by growth in the mini-vehicle market across Japan and the benefit of our new products in those segments.
Turning to North America; in the US our sales grew 14.5% to 623,000 units, out-performing the overall market and lifting our share to 7.7%. Pathfinder, Rogue, Altima and the Nissan LEAF all contributed positively to these results. In Canada, sales increased 14.8% to 50,000 units. Sales also increased in Mexico to 126,000 units, where Nissan is the market leader.
In China, Nissan's sales fell by 8.3% in the six months to June 30 in spite of an encouraging performance by the new Sylphy and new Teana. Our overall market share in China was down 1.4 points at 5.8%, reflecting residual weakness from the political disturbance last year that affected all Japanese car makers.
In Europe, the market remains sluggish amid volatile consumer demand and intense price competition. Nissan saw sales decline by 6.1% to 308,000 units, although it held its position in the important UK market, one of the few growth spots in the region. Excluding Russia, Nissan maintained its European market share at 3.4%. In Russia, sales declined 13.9% to 70,000 units in a market down by 9.4%. Our situation has been worsened by the delayed delivery of important new products to customers.
In other markets - including ASEAN, Africa and South America - sales volume was down 8.4% to 424,000 units. Pricing pressures and the volatile competitive environment in Asia & Oceania contributed to an 11.8% sales decline to 177,800 units. As fiscal incentives expired in Thailand, sales decreased 33.7% to 35,000 units. In a declining Indian market, Nissan's sales were down by 9,000 units. In Latin America, sales decreased by 17.8% to 99,700 units. This was primarily due to the new trade constraints in Brazil, where sales declined 29.8% to 40,200 units. These declines were partially offset by the 10.1% increase in sales to 96,400 units in the Middle East.
FY13 H1 financial performance
I will now go through our overall financial performance for the period. On a pro-forma basis, consolidated net revenues increased 668.6 billion yen, to 5.2154 trillion yen, primarily driven by the correction in the Japanese yen.
Operating profit fell to 264.7 billion yen due to several factors including higher-than-expected costs related to product recalls and lower sales in several emerging markets - where Nissan also suffered a double-hit with unfavorable currency movements. Net income came in at 189.8 billion yen, up slightly from the same period last year.
Given this performance and our anticipated market conditions for the remainder of the fiscal year, we have decided to revise our sales and earnings forecasts for the 12 months ending March 31, 2014.
Our 2013 fiscal year sales outlook is being revised down by 100,000 units to 5.2 million vehicles. Although we are revising up our sales forecasts for Japan, China and North America, we are unable to offset worsening results in Russia and many important emerging markets.
As a result, Nissan has revised its full-year forecast, using a foreign exchange rate assumption of 97 yen to the dollar and 130 yen to the euro for the second half. It is based on a proportional consolidation of our Chinese joint venture.
- Net revenue is expected to be 11.2 trillion yen, up 16.3% compared to fiscal year 12;
- Operating profit is expected to be 600 billion yen, up 14.6%;
- Net income is forecast to be 355 billion yen, up 3.7%;
- Capital expenditure is expected to reach 570 billion yen, up 8.7%;
- And R&D expenses will amount to 520 billion yen, up by 10.7% compared to last year.
Our second-half profit will enable us to deliver positive annual free-cash-flow and secure solid returns to shareholders. Nissan remains committed to a dividend pay-out of 30 yen per share for the fiscal year, and earlier today our Board approved payment of an interim dividend of 15 yen per share to be made on November 26, 2013.
In situations of challenge and adversity, Nissan has a proven record to act decisively and ensure we concentrate on the actions required to keep the company on track. With our performance in the first half of the year, we have determined the areas of deficiency and weaker-than-expected performance. And as I will detail in a moment, we have taken immediate actions to correct these shortfalls.
Our confidence in our mid-term business plan - Nissan Power 88 - is absolute. When we launched the plan in 2011, it was the first six-year plan for the company and represented substantial investments in capacity, technology and products. Nissan Power 88 is not only a plan for mid-term growth but represents the essential investments needed to make us competitive through 2020 and beyond.
Our CAPEX and R&D expenses have peaked as a percentage of revenue with the heavier burden of those investments behind us by the end of this fiscal year. Looking ahead, we will target capital expenditures and R&D expenditures to be flat or lower during the second half of the plan period.
As an example, to support our volume growth plans, we have been engaged in multiple plant constructions and extensions. During this fiscal year alone, we have nine separate manufacturing projects underway, each of which drive substantial cash outflows with zero return. From next year those projects drop to two locations, allowing us to start gaining the benefits from our newly installed capacity.
Likewise for our new model introductions. Although we maintain our pace to launch, on average, a new vehicle every six weeks for the six years of the plan, many of the larger volume global growth models came during the first half of the plan period.
This year, we will launch the Nissan Rogue, X-Trail and Qashqai as well as the all-new Infiniti Q50 sedan. Although each of these products represents major investments, they are also significant profit-drivers for the company.
We are focused on optimizing selling expenses, balancing the need for sustained brand-building in the face of intense pricing and incentive activity in North America and Europe. In the first half of the plan, we have focused on building our brand and gaining greater control over our fixed marketing investments. For the second half of this fiscal year and for the remainder of the plan, we will be applying that same focus to our variable selling expenses. We see substantial upside to this activity.
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