May 14, 2018

Fiscal Year 2017 full-year financial results Ė remarks from CEO
Hiroto Saikawa

I would like to first start with our global sales performance. In fiscal year 2017, total industry volume rose 1.9% to 93.52 million units globally. Nissanís global sales volume increased 2.6% to 5.77 million units. Our market share increased 0.1 point to 6.2%.

Moving to our sales performance in key regions...

First, in Japan, total industry volume rose 2.4% to 5.2 million units. Our sales were impacted by the recalls and suspension of production and shipments due to the vehicle inspection issue, but Nissan retail sales increased from the previous year by 4.8% to 584 thousand units, and our market share grew to 11.2%. This sales growth was driven by the Note e-POWER, Serena e-POWER, and new Nissan LEAF, as well as the Dayz and Dayz Roox minivehicles.

In China, where our sales are calculated on a calendar-year basis, TIV increased 1.8% over last year, reaching 27.35 million units. Nissan sales increased significantly by 12.2% to 1.52 million units, for a market share of 5.6%. This was led by strong sales of the X-Trail and Sylphy. For the 3-month period to the end of March, our sales maintained this good momentum, outpacing the market, and we reported sales of 336 thousand units. Our position in China remains strong.

Moving to North America, in the U.S., the market grew steadily until fiscal year 2017, during which TIV fell 1% to 17.31 million units. Nissanís sales totaled 1.593 million units, up slightly from the previous year, resulting in a market share of 9.2%. The Rogue and Rogue Sport led our sales growth. In Canada, we continued to experience steady growth, as unit sales rose 6.6% yielding a market share of 7.2%. In Mexico, TIV decreased 8.9% and Nissan sales decreased 14.3% to 351 thousand units. However, we maintained a market share of 23.5%, and held our number-one position.

In Europe excluding Russia, while TIV rose 1.5% to 18.31 million units, Nissanís sales fell by 4.6%, to 652 thousand units. On the other hand, in Russia, we are seeing increase in total industry volume, and Nissanís sales increased as well. However, since we did not keep pace with TIV growth, our market share fell slightly.

In ďotherĒ markets, there are four regions represented: ASEAN; Latin America; Middle East; and Africa and others. We are seeing healthy growth in the Latin America region, and also in the Africa and others region. While total industry volume in the Middle East decreased, Nissanís sales decreased at a lower rate. In Asia and Oceania, our sales underperformed versus the marketís growth. In this fiscal year, we will take a more aggressive approach in this region.

Next we have the summary of financial results for fiscal year 2017. For the fiscal year, revenue slightly increased to 11.9512 trillion yen, although unfortunately operating profit decreased. We saw an increase in net income due to the impact of tax reforms in the U.S., and we had healthy free cash flow at 407 billion yen. Net cash exceeded 1.7 trillion yen.

The following are our fiscal year 2017 financial results. Again, our net revenue was 11.95 trillion yen. Operating profit was 574.8 billion yen, yielding a 4.8% operating margin. Net income was 746.9 billion yen.

Next is our financial performance analysis. We had revised our original forecast downward to 565 billion yen, but thanks to a recovery in performance during Q4, we ended the year slightly better at 574.8 billion.

Looking at the year-on-year change in operating profit in detail: first, if we adjust to remove the impact of the divestiture of our equity stake in Calsonic Kansei, we start at 699.7 billion yen. FX had a small negative impact. Cost reduction efforts had a positive impact of more than 190 billion yen, which was partly offset by raw material price increases. These two factors combined for a 96 billion yen boost to operating profit. On the sales side, volume and mix had a negative impact of 105.8 billion yen, while increased marketing and selling expenses yielded a negative impact of 40.9 billion yen. R&D and manufacturing expenses have been rising slightly each year, and in fiscal year 2017 increased by 32.2 billion yen. Other items, including aftersales and sales finance, had a positive impact. This brings us to a subtotal of 675.2 billion yen when we consider corporate performance.

Special items, specifically the recent final vehicle inspection issue in Japan (90 billion yen) and the settlement of the U.S. class action lawsuits (10 billion yen) related to Takata air bags, amounted to a total of 100 billion yen. Subtracting that, final operating profit was 574.8 billion yen.

On a management pro forma basis, which includes the proportionate consolidation of our Chinese joint venture, net revenue increased substantially to 13.3 trillion yen. Operating profit was 742.4 billion yen, resulting in an operating margin of 5.6%.

Next I would like to touch upon key business highlights. In fiscal year 2017, we launched our midterm plan, Nissan M.O.V.E. to 2022. We are driving various activities under the following two missions: achieving steady growth and leading the technology and business evolution.

As we strive for steady growth, we have continued to offer new products and new technologies in fiscal year 2017, as summarized on this slide. We had the global launch of new Nissan LEAF. In Japan, we introduced the Serena e-POWER. The X-Trail and Rogue are now available with ProPILOT. The Datsun Cross was launched in Indonesia, and in the growing China market, our local Venucia brand introduced two models. We expanded the geographic deployment of our global strategic models: the Rogue Sport went on sale in North America, and the Kicks and Navara went on sale in China.

We will continue to launch attractive new models and expand our new technologies in fiscal year 2018. Globally, we will introduce a high-performance version of the new Nissan LEAF with more range and more power. And we plan to launch the new Altima. In China, the Sylphy Zero Emission will go on sale. We are offering our ProPILOT technology on the Rogue Sport and Qashqai, and both ProPILOT and our new VC-T variable compression ratio engine will be introduced on the INFINITI QX50. Additionally, the frame-based Terra SUV will go on sale. These are the key new launches slated for this fiscal year. We will also launch our Kicks global crossover in the U.S. I expect these new models to significantly contribute to our sales.

In terms of steady growth, I will touch upon some key areas of progress. First on China. As announced previously, our local joint venture has launched its TRIPLE ONE midterm plan. The company is aiming for an increase in sales of 1 million units under this midterm plan. In fiscal year 2017, we steadily grew sales and exceeded 1.5 million units. And in fiscal year 2018, we forecast an 11% growth in sales, to 1.69 million units.

We also expect growth in pickups and frame-based SUVs. This is an important pillar of our midterm plan, and is an area where we need to close the gap with other automakers. In fiscal year 2017 we reached 529 thousand sales, and our plan is to increase sales to 600 thousand in fiscal year 2018, and to double our growth rate to achieve sales of 790 thousand units by the end of fiscal year 2022.

I would also like to talk about the evolution of Nissan Intelligent Mobility. In fiscal year 2017, we launched the new Nissan LEAF EV, the global rollout of which is ongoing. Cumulative sales of the LEAF have now reached 320 thousand vehicles, and sales of new model have already reached 32 thousand units within only six months. Growth has been very strong. In Japan, in addition to the new Nissan LEAF, the Note e-POWER and Serena e-POWER are accelerating our electrification efforts. In China, our joint venture DFLís sales of EVs exceeded 23 thousand units, including China-unique EVs, in fiscal year 2017, which is more than three times the previous fiscal year. The new version of the Nissan LEAF will also launch in China this year. We expect to grow sales thanks to the launch of the Sylphy Zero Emission in China.

Autonomous driving is another part of Intelligent Mobility. ProPILOT availability is now expanding globally, offered on the X-Trail and Rogue. As a result of the U.S. and European start of sales, there are now more than 120 thousand vehicles equipped with the technology on the roads globally. This fiscal year, ProPILOT will be rolled out on the new Altima, Qashqai, Rogue Sport, and INFINITI QX50.

Mobility Services is a new business area. In Japan, we took a major step forward by conducting field tests of the Easy Ride service created with our partner DeNA. Building on the success of our Nissan e-share mobi program, we will increase our car-sharing network from 30 current locations in Japan to more than 500 by the end of this fiscal year. On the global front, through the Alliance, we signed a memorandum of understanding with DiDi Chuxing to explore the possibility of future business cooperation on a new electric vehicle car-sharing program in China. We are considering ways to expand these kinds of projects and services in the next fiscal year.

Finally, the Alliance. As we announced in the previous fiscal year, from April 2018 we started working on expanding convergence in key areas. Mitsubishi Motors has now joined the Alliance, and we have accelerated our activities aiming for further synergies.

For our sales outlook for fiscal year 2018, we forecast that total industry volume will increase by 2.0% to 95.4 million units. Our global retail volumes are planned to increase 2.7% to 5.925 million units, supporting our goal of delivering steady growth. We forecast a decline in sales in the U.S. and Europe for this fiscal year, but aim to offset this with sales growth in Japan, China and other markets such as Latin America and ASEAN.

Based on this sales forecast, Nissan has filed the following full-year forecast with the Tokyo Stock Exchange. This is on a TSE reporting basis, and does not include our China JV in revenues or operating profit. We are forecasting sales volume of 5.925 million units and net revenues of 12.0 trillion yen for fiscal year 2018. Operating profit is forecast at 540.0 billion yen, for an operating profit margin of 4.5%. We expect to report a net income of 500.0 billion yen. This is based on exchange rate forecasts of 130 yen to the euro, and 110 yen to the dollar.

Now Iíd like to look at the year-on-year operating profit variance for fiscal year 2018. The absence of the one-time impacts from special items in fiscal year 2017, including the vehicle inspection issue and Takata class action lawsuits, will result in a positive change of 100.0 billion yen. We also expect to see a positive impact of over 140 billion yen from revenue and cost performance improvements. This increase will be achieved despite some negative factors such as costs related to Euro6d implementation and measures taken to adapt to crash tests in North America. Such negative factors will amount to roughly 60 to 70 billion yen.

We see several negative factors during this fiscal year, including a 44.0 billion yen increase in strategic R&D investment; an 80 billion yen negative impact from increasing in raw material costs; and a 20.0 billion yen negative impact from other items. If we were at the same exchange rate levels as in fiscal year 2017, operating profit would be expected to reach 675.0 billion yen, which would have been a 100 billion yen increase. But after currency impacts, including a dollar-yen exchange rate of 105, are taken into account, which we see as a negative impact of 135 billion yen, we forecast our operating profit for fiscal year 2018 to be 540.0 billion yen.

Moving to shareholder returns, as we previously stated, the Board is proposing to lift the full-year dividend to 53 yen per share. For fiscal year 2018, we continue to maintain a progressive dividend policy, and we are forecasting an increase in the full-year dividend to 57 yen per share.

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