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FY 2007 First-Half Results
October 26, 2007
Carlos Ghosn
President and CEO
Nissan Motor Co., Ltd.


Good afternoon everyone. Thank you for joining us today.

At the beginning of this fiscal year, we vowed to get Nissan back on track to sustainable, profitable growth.

Despite a tough environment for the industry over the first half, we have made progress on many fronts. We are executing a smooth correction back to our long-term course… and we’re on track to deliver our full-year objectives.

For the first half of fiscal 2007… our revenues increased by 11.7%.

Our consolidated operating-profit margin increased from 6.1% in the first quarter… to 8.4% in the second quarter, resulting in 7.2% for the first half.

Mainly due to a higher effective tax rate than last year and less favorable one-time items… first-half net income decreased 22.5% to 212.4 billion yen.

I will start with a review of our global sales performance and then provide details of our financial results. Before concluding I will share our outlook for the full fiscal year.

Then I look forward to taking your questions.

First-half global sales performance

First, an update on our sales.

For the first six months of fiscal 2007… with total industry volume declining in Japan, the U.S. and Europe – Nissan’s sales totaled 1 million 816,000 units, up 6.3% from 2006.

Around the world, we introduced seven all-new models in the first half… and, including the deployment of new models in various regions, we had  more than 15 product-launch events.

In terms of sales performance by region… 

In Japan, total industry volume fell 8.1% – with minicars down 6.8% and registered vehicles down 8.8%. 

In this declining market, our sales were down by 5% from last year to 332,000 units – with minicars up 13.2% and registered vehicles down 8.7%. Consequently, our market share in Japan increased by half a point to 13.4%.

Contributing to this result… our all-new crossover Dualis, with sales of 15,000 units, and our new-generation X-Trail, with sales of 13,000 units, up 38%.

In the United States, our first-half sales rose 5.4% to 534,000 units – in the context of total industry volume that fell 2.4%. Here again, with first-half market share at 6.3%, we gained half a point of share in a declining market.

In the Nissan Division, first-half U.S. sales rose 5.5%.

Two key products launched last year continue to make progress. Versa and Altima both earned 5-star crash ratings and “Recommended Vehicle” status from the influential Consumer Reports magazine.

With Versa, we sold 45,000 units in the first half, increasing our market share in this segment to 17.9%. And, compared to its predecessor in fiscal ‘06, volume for our new Altima was up 27.9% to 144,000 units… boosted by demand for the first-ever coupe version that went on sale from May.

Meanwhile, interest surrounding the launch of the Rogue in September began to build fresh momentum for the second-half.

Infiniti sales in the U.S. rose 5.1% from fiscal ‘06 to surpass 61,000 units. Sales of the G35 Sedan – also recommended by Consumer Reports – were up 52% on volume of 26,000 units.

In August, the new G37 coupe reached showrooms, creating further sales traffic for our dealers.

In Europe, where total industry volume dipped 0.9% to 10.9 million units, Nissan sold 304,000 units, up 10.5% from a year earlier.  

Growth in Russia continued to offset declining sales in Western Europe. Nissan’s first-half sales in Russia reached 67,000 units – double the volume a year earlier.

The new UK-built Qashqai, which scored the maximum 5-stars in the Euro NCAP adult-occupant safety test… accounted for 20% of our European sales volume… and its momentum continues to build.

In Russia, Ukraine and countries in Northeast Europe, Qashqai is back-ordered up to six months. To meet this strong demand we are increasing capacity at our Sunderland plant by 20% to 185,000 units per year.

With sales of 12,900 units, the all-new X-Trail continued our European product offensive.

Following its launch last year, Infiniti is off to a fast start in Russia, capturing 7.3% of a luxury market that has grown by 70% over the past year.

In the General Overseas Markets, including Mexico and Canada, first-half sales rose 13.1% to 646,000 units.

  • Our volume in China rose 25.2% to reach 225,000 units… driven by growth in light commercial vehicles, the introduction of Livina and continuing demand for Tiida.
  • The launch of Grand Livina in Indonesia restored sales to a more reasonable level of 11,000 units.
  • In the Middle East, at 89,000 units, sales were up 21.3% over 2006… mainly driven by pick-up trucks.
  • Strong sales in these markets helped offset declines in Mexico and Taiwan.

First-half 2007 financial results

Let me now turn to our first-half financial results.

Compared to the same period in fiscal ’06… consolidated net revenue rose 11.7% to reach 5.0645 trillion yen. This was primarily due to growth in global sales volume and favorable exchange rate impact.

Operating profits increased 5.3% to 367.1 billion yen. Favorable exchange rates and volume growth, as well as purchasing cost-reduction efforts… offset higher raw-material prices and mix deterioration.

Behind these numbers is a significant shift from a 3.2% decline in Q1… to growth of 12.0% in Q2.

Operating-profit margin reached 7.2% over the first half… with a rise from 6.1% in the first quarter to 8.4% in the second.

Ordinary profit came to 360.3 billion yen, the same level as last year due to higher non-operating expenses.

Net extraordinary items totaled a negative 19.7 billion yen, 14.5 billion yen less favorable than last year.

The main differences are due to a one-time gain from selling Nissan Diesel shares to Volvo last year… and provisions taken in this first half for early-retirement programs at Calsonic Kansei and Nissan Shatai.

Our effective tax rate evolved from a very favorable 19.2% last year to 35.9% this year. 

Our tax rate last year was exceptionally low… mainly due to tax incentives for the move of our U.S. headquarters to Nashville… and deductions for losses incurred in our domestic dealer restructuring. 
As a result, net income was at 212.4 billion yen, down 22.5% from the previous year. 

Outlook for fiscal 2007
Having reviewed the first-half results… let me move on to the full-year outlook.  

As we consider the risks and opportunities to the forecast, the most significant risks continue to be high incentive levels worldwide… mix and grade deterioration, high commodity prices and high energy prices. In addition, we anticipate continuing weakness in the U.S. market.

Our major opportunity is to flawlessly deliver the strong products in our pipeline. And at this point in our product cycle we are much better equipped to gain ground in the face of headwinds.

We expect to benefit from further growth in the General Overseas Markets… from growth in our Infiniti and light commercial vehicle businesses…, and better utilization of low-cost sourcing from leading competitive countries.

This month, in Japan we began selling the new Skyline coupe. And in December the eagerly awaited GT-R will reach domestic dealers. This is a great pair to have in the showroom – one that should attract increasing traffic in the fourth quarter.

What’s more, we will have a better supply of the popular Dualis as production of 24,000 units per year begins from early 2008 at our Kyushu plant.

In the U.S., in December, the all-new Infiniti EX35 crossover will go on sale. From January 2008, our dealers will have the new Murano alongside the Rogue – another great pair in the showroom.

Across the General Overseas Markets we will extend the Livina range and introduce models such as Qashqai and X-Trail in specific markets. And Thailand will have a new single-cab version of the Frontier Navara pickup.
To support these vehicle launches and overall sales growth, in this second half our plants in Japan will operate at a very high capacity-utilization rate – 104% by the industry-standard measurement of 3548 hours per year… and 84% according to our internal standard for Japan, which is 4400 hours per year.

Taking into account these risks and opportunities, we are maintaining our full-year forecast of 800 billion yen operating profit and net income of 480 billion yen.


What does this mid-term result tell you about Nissan’s current position and future prospects?

Go back to our stated objective at the start of the year… to “address short-term issues within our control while remaining focused on our long-term goals.”

In the second quarter you can see clearly… the effect of our performance-boosting measures. And you can expect more in the second half. But this has not been achieved at the expense of our long-term goals.

To achieve our long-term goals, we are advancing on several fronts.

First, we continue to investing massively in future product – distinctive and attractive vehicles that differentiate our brands from the competition.

Over the three years from fiscal ’08 we will launch more than 33 new products – an average of almost one new vehicle a month.

Second, we are investing in customer-friendly technology and innovations that will distinguish our products, build our brands… and restore our reputation as a technology pioneer.

If you attended the Tokyo Motor Show this week, you could see the evidence on the Nissan stand.

In both the GT-R – our multi-performance supercar – and in PIVO2 – our revolutionary electric-car concept – you can see Nissan not only developing cutting-edge technologies… but successfully integrating them in products that fully engage their potential.

As substantial investments in R&D programs start to bear fruit, this year we will introduce several significant and original technologies in new products.

Already on the market… we have the advanced VVEL engine in the G coupe and Skyline coupe. On the Skyline coupe we also have a new pedestrian-protecting pop-up engine-hood.

This week, the Around-View Monitor made its debut in Elgrand… and our Lane Departure Prevention system will be featured in the Infiniti EX this December.

These innovations will build Nissan’s name as a leader in safety. And, as you can see on this chart, there’s much more to come.

PIVO2 shows how Nissan intends to be among the leaders in the race to a new age of sustainable mobility. Electric vehicles are just over the horizon. And just around the corner we will introduce very competitive clean diesels – in X-Trail in Japan from the fall of 2008… and for the U.S. in Maxima from 2010.

We already have a hybrid version of Altima in the U.S. – and under our Nissan Green Program we will introduce a Nissan-original hybrid by fiscal 2010.

Third… We continue to prepare the company for future global growth – particularly in the emerging markets.

We expect our sales volume in the General Overseas Markets will grow by 19% this year to 1 million units – 1/3 of our global sales.  As these markets expand, we are building new production capacity in several key countries.

In Russia, with our sales of imported cars already doubling year-on-year… in 2009 we will open our new assembly plant in St. Petersburg with an annual capacity of 50,000 units.

In India, where TIV grew by 20% to 1.5 million units last year, we are moving quickly, along with Renault and local partners, to establish several new ventures.

A new manufacturing plant in Chennai will come on stream in 2009 to support growth of the Alliance brands in India. And to support our LCV business, we are close to finalizing a new joint venture with Ashok Leyland.

In Latin America, the combination of Nissan’s established base in Mexico – two plants with total capacity of 550,000 units – and Renault’s presence in Mercosur gives the Alliance a solid base for growth.

In Morocco, meanwhile, our Alliance is planned to invest up to 1 billion euros in another global production base. Strategically located in a duty-free zone at Tangier, this complex will open in 2010 with a planned annual capacity of 400,000 units.

In the next decade, when investments now underway are completed, Nissan and Renault will have a flexible and comprehensive global production network covering all the emerging markets – and a high-quality, low-cost supply network supporting all existing operations.

We are likewise expanding the global footprints of our luxury brand, Infiniti, and our Light Commercial Vehicle business.

Infiniti now has more than 230 dealers in 15 countries – with China and Ukraine added in this fiscal year. Global first-half sales, at 74,000 units, were up 11.6%.

Of this volume, 61,000 units sold in the U.S. But with growth at 60% in the Middle Eastern GCC markets… and 113% in Korea, Infiniti is establishing itself around the world. Once it enters West European markets from 2008, Infiniti’s credentials as a global luxury brand will be further enhanced.

Our Light Commercial Vehicle business achieved 7.8% volume growth in the first half – driven by new models in the AD, Clipper Rio, Atlas and Cabstar ranges.

We will soon announce new LCV plans for India. And, like Infiniti, the LCV team is planning to cross the Atlantic… but in the opposite direction. With plans to enter the U.S. market already well advanced, our LCV presence will soon be fully global as well.

New products… new technologies… new presence in emerging markets… new businesses. To stay among the leaders in an era of unprecedented change we must maintain our focus on long-term growth.

But this year, we will also get our performance back on track.

Today’s first-half results are in line with our expectations in this regard, as a milestone en route to delivering our full-year objectives.

Please join me in April 08 as I detail the next chapter of Nissan’s growth through our next multi-year business and dividend plan.

Until then, you can continue to expect the best from Nissan.

Thank you. Now I look forward to your questions.