SPEECHES


FY2021 Annual General Meeting of the Shareholders

June 22, 2021

CEO Makoto Uchida

Now, I would like to update you on the progress of Nissan NEXT business transformation plan and report the full-year results of the fiscal year 2020 as well as our action for future development. Following this, we will review with you the items to be resolved today.

Nissan is making steady progress in implementing Nissan NEXT business transformation plan. Let me share with you the performance based on the three pillars.

The first pillar is rationalization. On production capacity, in addition to our decision to close two plants, we made adjustments including changes on the work shift. We are on track to streamline our product portfolio with a focus on the core models to reduce associated costs. We are also successful in improving marketing & sales and general & administrative expenses, and generating significant cost savings.

As a result, the company delivered over 350 billion yen in cost reduction over the two years exceeding the initial expectation. With this fixed cost reduction, we were able to bring down operating profit breakeven sales volume to approximately 4.4 million units.

Turning to our efforts to prioritize and focus on the company’s strengths, Nissan made significant improvements in the quality of sales across the globe during the fiscal year 2020 as a step forward to achieving long-term profitable growth. Nissan enjoys better profitability thanks to introduction of attractive products and technologies with value pricing.

By shifting the sales strategy from “push” to “pull,” we are benefiting from optimal inventory management, better quality of sales, and improved operating cash flow. Our enhanced efforts in digital sales experience following the COVID-19 outbreak resulted in 12% of our global sales coming through customer digital journey.

In the U.S., Nissan improved net revenue per unit while reducing incentives. The customers’ response to the all-new Rogue has been positive, and helped lift our overall market share during the fourth quarter to 5.8%.

Similarly, in Japan, while models like Kicks e-POWER and Roox remain strong, the introduction of the all-new Note e-POWER drove Nissan’s overall market share to 11.4% with an increase in net revenue per unit. There are more than 500,000 customers driving e-POWER equipped vehicles in our home market. About 50% of the all-new Note e-POWER users adopt ProPILOT advanced driver assistant features.

In China, we kept our discipline on incentives while gaining market share. Despite falling transaction prices in the market, we minimized the impact on net revenue per unit. For the fiscal year 2021, we target an increase in net revenue per unit by leveraging the upcoming new models to meet the customer aspirations.

In Europe, we achieved a significant reduction of fixed costs by rationalizing our production and leveraging the Alliance resources. Nissan Juke saw a big improvement in both sales volume and revenue per unit. Nissan will continue electrifying volume-selling models including QASHQAI and X-Trail by widening e-POWER application.

We are making investments for future development under Nissan NEXT. Nissan promised to deliver 12 new products in 18 months, out of which 11 models were launched or unveiled to date. These models will bring growth during and beyond Nissan NEXT. We will deliver a wide range of innovative technology that only Nissan can offer.

Nissan continues carrying out the transformation while striking a balance between short-term performance recovery and building stronger foundation for the future.

Let me present the results for the full fiscal year 2020.

Our global retail sales volume for the fiscal year 2020 was 4 million 52 thousand units, up 0.9% from the previous guidance. Despite a number of headwinds including the pandemic and semi-conductor supply shortage, we boosted our sales in the fourth quarter against the third quarter.

Our growth was fueled by the strong performance of all-new models including Note e-POWER in Japan and Magnite in India as well as the existing models such as Juke in Europe and Sylphy in China.

These are the key financial performance indicators for the fiscal year 2020 on an equity-basis. Consolidated net revenues stood at 7.9 trillion yen. Operating loss totaled 150.7 billion yen, and resulted in net loss of 448.7 billion yen. Net revenues and operating profit decreased year-on-year primarily due to the decline in unit sales resulting from the COVID-19 pandemic especially in the first quarter.

As we made tremendous improvement in quality of sales and net revenue per unit while controlling incentives and inventories, our profitability improved quarter by quarter, resulting in smaller operating loss year-on-year.

Given continued uncertainty due to the pandemic, we forecasted 470 billion yen of operating loss in the beginning of the year. In the end of the year, we were able reduce the loss to 150.7 billion yen, less than one third of the original guidance.

Nissan also hit an operating profit margin of 2% in the three-month period of the 3rd quarter based on proportionate consolidation of our joint venture in China, achieving the Nissan NEXT milestone of the fiscal year 2021. The result demonstrates our potential.

Please be reassured that we continue to maintain strong levels of liquidity.

Given the negative automotive free cash flow for the past year, the current business climate, and the investment needs for the future growth, we decided to suspend dividend payments for the year-end.

I would like to express my sincere apology to our shareholders for this conclusion. It is imperative to continue investing for the future, carry out business transformation to ensure steady growth, and enhance our corporate value. Your kind understanding and continued support will be highly appreciated.

Coming to our full-year outlook.

For fiscal year 2021, the global auto market is expected to remain uncertain as the semi-conductor supply issue continues to impact the industry, and Nissan is no exception. Though it is difficult to forecast our sales volume for the year at this time, we currently estimate Nissan’s unit of sales to increase by 8.6% over the prior year to 4.4 million units.

Based on the assumptions, we forecast consolidated net revenues of 9.1 trillion yen, and an operating profit to “come out even.” Our net loss is expected to be 60 billion yen. Despite ongoing challenges, Nissan continues investing actively for future growth including R&D expenses and capital investments.

External factors including foreign exchange fluctuations and increase in regulatory and product enrichment costs, are expected to have a negative impact. Performance improvement in sales and monozukuri is expected to have a positive net impact of about 550 billion yen. While costs associated with new product launches will impact operating profit by 150 billion yen, these are necessary investments towards achieving Nissan NEXT and the growth beyond.

The company faces huge business risks such as the global shortage of semi-conductor and surging commodity prices for the year. Excluding these factors, we expect to achieve an operating margin of more than 2% including the proportionate consolidation of results from the joint venture operation in China, which is one of the milestones of Nissan NEXT. When we gave the full-year guidance back in May, given the uncertainties and the business risks, we forecasted an operating profit to “come out even.” However, we already see signs of recovery. Thanks to the strong results of our ongoing efforts over the past year, Nissan’s performance for April and May is better than our plan.

The new models that were launched last year continue to gain traction. Customers’ appreciation and recognition of our product and technology value are translating into greater profits and brand power. With a rapid vaccine rollout, we see growing demand in the U.S.

As we pay close attention to the market trends and adjust production of models, we are minimizing the negative impact of the semi-conductor supply issue on the plant utilization rate. At the same time, Nissan is making every effort to make up for the production loss within the fiscal year while taking necessary action to ensure stable parts supply. We are making sure that any impact on the customers who are waiting for our products and our bottom line is minimized.

Nissan will keep the momentum, and take immediate and timely action on the business risks. The global Nissan team is working together to implement Nissan NEXT, and doing everything they can to avoid showing losses for three years in a row.

This year, Nissan will be launching a number of models that express who we are including the all-new Ariya crossover EV, the all-new Z that represents our DNA, and the Infiniti QX60. We are enhancing our corporate value, profitability, and our brand power by introducing electrified vehicles, which no one else, but only Nissan can offer. This starts with the all-new Ariya.

The all-new Ariya attracted about 200,000 handraisers as of today. Since we started taking pre-orders for the all new Ariya limited edition in Japan earlier this month, the model is achieving a good headway with an order placement of more than 4000 units. The all-new kei-car EV, which we are jointly developing with Mitsubishi Motors at NMKV, will be introduced in Japan ahead of our competition.

We are also widening the application of the e-POWER system across our models and extending it beyond Japan’s success to China and Europe.

Through these initiatives, Nissan is determined to get closer to the Nissan NEXT milestone for this fiscal year as much as possible, and pave the way to reach 5% operating margin, which is the final goal of Nissan NEXT in the fiscal year 2023.

Many of you mentioned about the importance of earning back our stakeholders’ confidence. We all take this to heart as we keep on holding dialogue with our employees and business partners including dealers and suppliers. We know that trust is something that cannot be rebuilt overnight. However, we are seeing signs of recovery in the findings of various surveys.

Nissan’s mission is to continue strengthening the ties with our stakeholders, and deliver greater shareholder value while maintaining healthy levels of profitability and cashflow. Nissan strives to resume dividend payment as soon as possible by ensuring profitable business growth.

These were the progresses of Nissan NEXT, actual results of the fiscal year 2020, and the fiscal year 2021 outlook.
Now, I would like to share with you what Nissan is doing for the future.

The auto industry is undergoing once-in-century transformation. We see dramatic changes especially in the recent years. Examples include accelerated action to fight climate change, technological innovations for achieving carbon neutrality, and diversification of social and customer needs triggered by ageing society and the COVID-19 pandemic.

In the times of unprecedented uncertainty, it is crucial to run a business with a clear long-term vision for sustainable growth. In the past, Nissan was unable to adapt to changes with flexibility as a result of giving priority to short-term profits.

Based on lessons learned, we will demonstrate Nissan’s long-term vision for the next ten years and beyond and a road map to make it a reality.

The basic premise is Corporate Purpose: Driving innovation to enrich people’s lives. Nissan has been providing new values to our customers through innovative products and services under the spirit of “Dare to do what others don’t.” This is Nissan-ness, and raison d’etre of our company.

Though we are not ready to provide the contents of the long-term vision, which is under development at this moment, what we can say is that the pillars include electrification and autonomous driving technologies in which our strength lies.

Nissan has been working on electrification and autonomous driving technologies for long years in pursuit of zero emission and zero fatality. Our company has acquired rich knowhow that others do not have in the process of developing a number of new pieces of technology and products. What we have been building up over the years even in difficult times is bearing fruit.

In order to maintain our competitive advantage in the ever-changing industry, Nissan is maximizing the Alliance benefits, and widening collaborative network with partners who share the same ambition.

Nissan is shoring up efforts in electrification. As part of the effort, by the early 2030s every all-new Nissan vehicle offering in key markets will be electrified.

We are also driving technological innovation. Nissan is developing innovative battery technology including cobalt-less battery and all-solid-state battery. In addition to EV, we are updating the e-POWER system. The on-board engine that is a dedicated electricity generator for the next-generation system’s e-powertrain achieves the world-leading 50% thermal efficiency.

We are also seeking economies of scale and greater competitiveness in technology by aligning specifications and increasing commonization of core components such as battery, motor, and platform to about 70% within the Alliance.

These sophisticated electrified vehicles will be produced by Nissan Intelligent Factory. We are introducing the first Nissan Intelligent Factory in the Tochigi plant where we will start production of the all-new Ariya.

Nissan does not only sell cars, but also make various contributions to actual society by leveraging automotive technology that the company has been developing. For example, we have signed over 130 agreements under the Blue Switch program that is designed to address societal issues in Japan by using EVs. In Fukushima prefecture, we are working together with the local authorities and residents in community planning for the future including EV mobility service.

In the ecosystem centered around battery, we are using EV as a mobile storage battery, and used EV batteries are given second life through 4R Energy Corporation. We are combining the second-life batteries and renewable energy, and expect to increase collaboration with the energy sector.

We are accelerating efforts for new value creation that only Nissan can offer.

These are some of the elements of the long-term vision, which we are currently working on. First and foremost, we have to achieve Nissan NEXT.

We intend to gain visibility of short-term performance recovery based on the results of the months of April and May and the latest situation when we announce the earnings for the first quarter next month. It is also our intention to communicate the long-term vision that is under development around this fall.

We already see changes towards the long-term vision inside the organization. People are the drivers of the changes. The entire team of global Nissan is fired up. Every individual is passionately working on transformation. Their hard work is changing people’s perception on Nissan.

As I have been saying on many occasions, people are Nissan’s assets. Nissan surmounted many challenges and adversities thanks to its people’s power. The top management is leading to gather all the forces of our people to bring out amazing power of Nissan. We will definitely make Nissan shine again. Your ongoing support will be greatly appreciated.