July 26, 2012

Fiscal Year 2012 First-quarter Financial Results
Media Conference
Joji Tagawa, Corporate Vice President, Investor Relations
Nissan Motor Co., Ltd.

In the first three months of the current fiscal year, Nissan's performance has been respectable given the challenging macro-economic environment. We continue to be impacted by the strengthening Yen and volatile market conditions stemming from the euro-zone debt crisis.

For the three months ending June 30 2012, Nissan is reporting consolidated net revenues of 2.136 trillion yen and operating profit of 120.7 billion yen, which equates to an operating margin of 5.6%. The year on year deterioration in operating profit, which I will explain in more detail, reflects both currency issues and selling costs related to seasonality in our product renewal cycle. Net income was 72.3 billion yen, which represents a 3.4% net margin. Free cash flow for the auto business was a negative 39.3 billion yen but we remain in a net cash position of 509.2 billion yen.

As we start the second year of our Nissan Power 88 mid-term plan, we remain on track. An external indicator of our positive momentum is the recent upgrade by Moody's of our corporate credit rating to A3.

Business update

Under Nissan Power 88, we are working to improve the company's brand positioning. We recently launched our first ever global brand campaign, which you may have seen at major airports worldwide. The campaign is designed to highlight Nissan's innovative products and technologies by using exciting imagery and brand ambassadors. This campaign is the first activity by the newly-formed global marketing organization that was tasked to accelerate Nissan's brand power. You will see other similar, innovative campaigns over the medium term.

In April the first full vehicle prototype of the Nissan NV200, the 'Taxi of Tomorrow' was unveiled in New York. The NV200 will arrive on the streets of New York in 2013. The Nissan taxi will deliver unprecendented levels of innovation and comfort to New York's 600,000 daily taxi riders.

Nissan has launched several new cars across the world. In China, at the Beijing Motor Show, we unveiled the new Sylphy and launched the D50, the first production model from Venucia, the new brand under our joint venture with the Dongfeng Motor Group. Also in China we started sales of the Infiniti M long-wheel based, the first high-end Infiniti sedan tailormade for the Chinese market. In the US, the new Nissan Altima was launched last month, one of five all-new Nissan models set for introduction in the next 15 months. In Japan the new CIMA was launched followed more recently by the NV350 Caravan, a versatile vehicle that can be used for both commercial and leisure purposes. Last week, we unveiled the Nissan Note, a new global hatchback, which will first begin sales in Japan in early September.

Across the world we are increasing our production capacity. In China, we will invest RMB 2 billion ($315m) in the Xiangyang plant which will also produce Infiniti models for the Chinese market. Production capacity at the plant will increase from 130,000 to 250,000 units. We also announced a RMB 5 billion ($800m) investment to build a brand new manufacturing facility in Dalian. This is our first plant in north-east China with initial capacity of 150,000 units and is an important step towards our target of delivering 2 million unit sales in China by 2015. In Russia, we plan to double capacity at our St Petersburg plant by 2014. In the US, we broke ground on a new manufacturing facility in Decherd, Tennessee, where we will produce Mercedes-Benz 4-cylinder gasoline engines for Infiniti and Mercedes-Benz models. These announcements follow significant capacity expansion announcements earlier in the year in Mexico and last year in Brazil.

We continue with our commitment to zero emission under Nissan Power 88. In May we announced an all new electric model alongside the award winning LEAF. The e-NV200 will enter production in 2013 and will be made in our Barcelona Plant. Based on the NV200 currently produced at the plant the e-NV200 will be an important and innovative addition to Nissan's global range of light commercial vehicles. In May we showcased the new "Leaf to Home" power supply in Japan. This is an industry first backup power supply system that can transmit the electricity stored in the large-capacity batteries of Nissan LEAFs to a residential home. This system has been showcased at dealerships in Japan since June to help promote efficient electricity management and demonstrate the features built into electric vehicles. All current Nissan LEAF owners in Japan are now able to use the system, depending on their home's installation requirements.

Our Alliance network continues to grow. In May, Renault-Nissan announced an investment of $750m in AvtoVaz, Russia's leading car company. In the second half of this year, we will launch our first locally-built entry-level car, the Almera, which will be built at the AvtoVaz plant in Togilatti.

Having summarized some of our operational highlights, I will now go through our overall performance for the first three months in detail, starting with the unit sales numbers across our operating regions.

FY12 Q1, Sales performance by market

For the three months ending June 30 overall global industry volumes increased 6.5% to 20.37 million units. Nissan's overall sales results were up 14.6% at 1.21 million units and our global market share increased by 0.4 percentage points to 5.9%.

Looking across the regions...

In Japan, the Total Industry Volume - or TIV -increased 62.6%, to 1.26 million due to the government subsidies and the industry's recovery from last year's earthquake. Our sales increased 19.5% to 141 thousand units. In 2011, our market share benefited due to our speed of recovery vs. that of our competitors. As our competitors have now recovered and given the increased shift to minicars, our market share decreased to 11.2%.

In China, the TIV over the January to March period decreased 2.3% to 4.49 million units. In contrast, Nissan's sales increased by 12.2%, to 334 thousand units. The Tiida, Sunny and Qashqai models were the main contributors to our sales growth. In the April to June period, our sales continued to show positive momentum, increasing 15.9%, resulting in a market share of 7.6%.

Turning to North America; In the US, the TIV increased 16.3% to 3.8 million units. Nissan's sales volume increased 16.3% to 255 thousand units, maintaining market share of 6.7%. In Canada, sales were up 2.8% to 26 thousand units. In Mexico, Nissan maintained its strong market share position at 24.9%, with sales of 57 thousand units for the period.

In Europe, the TIV decreased 3.5% to 4.83 million units. Nissan's retail sales volumes decreased at a lower rate of 1.7% to 167 thousand units in the period. And therefore, our market share increased 0.1 point to 3.5%. The Qashqai and Juke were our top sales contributors. Among the market highlights, Nissan's sales in Russia increased 19.6% to 39 thousand units, and our market share rose to 4.9%.

In other markets - including ASEAN, Africa and Latin America - our sales volume was up 30.5% to 229 thousand units. Asia and Oceania sales increased 29.9% to 100 thousand units. Sales in Thailand increased 44% to 24.1 thousand units. Sales in Indonesia increased 45.6% to 16.9 thousand units, while sales in India increased 124% to 10.5 thousand units. Latin America was up by 36% to 63.5 thousand units, with Brazil up 133.6% to 30.7 thousand units.

FY12 Q1, overall consolidated financial performance
I will now go through our overall consolidated financial performance for the period. Net revenues increased 54.4 billion yen, to 2.136 trillion yen, primarily driven by the increase in volumes, which was only partially offset by the negative translation impact on overseas revenues due to the yen strengthening.
Operating profit totaled 120.7 billion yen, yielding a 5.6% operating margin. Assuming foreign exchange rates at the FY11 level, operating profit would have been 146.3 billion yen, equivalent to an operating profit margin of 6.6%.
Net income was 72.3 billion yen, giving a net margin of 3.4%.

Looking at the movement in operating profit starting from the 2011 fiscal year first quarter OP of 150.4B:

  • We experienced a 25.7 billion yen negative impact from foreign exchange movement.
  • The increase in raw material and energy costs were a negative 18.6 billion yen.
  • Purchasing cost reduction efforts resulted in a saving of 54.0 billion yen.
  • Volume and mix produced a positive impact of 53.4 billion yen.
  • The increase in selling expenses resulted in a negative 76.4 billion yen. This reflected the impact of increased volumes, the normalization of advertising expense which was constrained after the earthquake in 2011 and higher level of incentives as availability was constrained in the prior period after the earthquake.
  • R&D expenses increased by 18.8 billion yen.
  • Other items, which included an increase in manufacturing costs, resulted in a positive impact of 2.4 billion yen.

At the end of the period, we continued to be in an automotive net cash position of 509.2 billion yen. If the yen had remained at the exchange rates that existed at the start of this fiscal year, our automotive net cash position would have been 532.4 billion yen.

In the first three months of the fiscal year, we have faced particular challenges caused by worsening exchange rates, higher selling costs - especially in the US - and unfavourable pricing compared with the same period of 2011. Although our operational results were in line with the previously announced full-year forecasts, we are far from complacent. Over the coming quarters, Nissan will launch a product offensive - led by the new Altima, Pathfinder, Sentra and Note - which we expect to generate further sales at enhanced prices and margins. This will be accompanied by continued actions to offset the over-valued Yen, and an extremely disciplined approach to cost control. Based on our existing exchange rate assumptions, these actions give us confidence that Nissan can deliver its full-year guidance.

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