SPEECHES


THE 123rd Ordinary General Meeting of the Shareholders
CEO Speech

June 28, 2022

1. Introduction

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 2021, full-year guidance for the fiscal year 2022 as well as our action for the future development. This will be followed by the presentation of the items to be resolved today.

We faced multiple obstacles including the humanitarian crisis in Ukraine, ongoing COVID-19 pandemic, energy and supply chain disruptions resulting in extremely challenging business climate in the past fiscal year. Despite these difficulties, every individual in Nissan has been working hard to overcome the challenges with strong support from our suppliers, dealers, and business partners. Above all, we received great support from our customers around the world who chose our brands. I would like to express my sincere appreciation for your strong support and contribution.

2. Nissan NEXT Progress

Let me start with the progresses of the Nissan NEXT business transformation.

When we embarked on Nissan NEXT in May 2020, we vowed to drive:

  • Rationalization
  • Prioritization and focus of operations

On rationalization,

  • We have optimized production capacity by 20%, enabling us to tailor production to match demand.
  • We are also on track to achieve our target of optimizing our global product line-up. The number of models has been reduced by 15% so far.
  • And we gained momentum by exceeding our target to reduce fixed cost by more than 350 billion yen.
    These are the progresses we made against the fiscal year 2018.

In terms of market focus, we have prioritized our core markets as the US, Japan, China and Europe. We have focused our global core models around enhanced C and D segment models, on electrified vehicles and sports cars with 12 new models introduced in the first 18 months of the plan despite ongoing headwinds.

Every new product has been well received in the markets. For example, in Japan, the Nissan NOTE and NOTE Aura that are equipped with e-POWER technology won major awards including Car of the Year Japan and RJC Car of the Year.

We saw an 18% increase in net revenue per unit demonstrating steady improvement in our quality of sales. This reflects increasing customer acceptance of our new models.

In summary, we have achieved the main elements of Nissan NEXT by rationalizing and focusing our business.

3. FY2021 Financial Performance

Turning now to the results of the fiscal year 2021.
Nissan sold 3.88 million units in the past fiscal year, which exceeded its full year forecast.

  • We achieved unit sales in Japan of 428,000 units.
  • In China, overall unit sales were 1.38 million.
  • We performed better in North America, where retail volumes were 1.183 million units - of which the U.S. accounted for 893,000 units.
  • In Europe, unit sales reached 340,000 units in a challenging market environment.
  • Other markets including South America, ASEAN, and the Middle East bucked the trend with unit sales of 543,000 units.

We provided the online shopping processes in key markets, and as a result, sales influenced by digital engagement have increased by 6 points from FY2020.

Let me present the financial results for the past fiscal year.

Despite the challenging environment, with the strong transformation, we have overachieved the outlook that we announced in February 2022 at our third quarter earnings announcement.

This slide shows our key financial performance indicators on both the China JV proportionate basis and equity basis.

On an equity basis, which is without our China JV operations, our operating profit for the year was 247.3 billion yen, with an operating margin of 2.9%. Net income was 215.5 billion yen.

Free cash flow for the automotive business was a negative 294.7 billion yen as a result of low production from the semiconductor supply shortage in the 1st half of the year. However, we have succeeded to bring it breakeven in Q3 and turned it positive for the 2nd half. Our net cash for the automotive business was 728 billion yen.

On a proportionate basis, which includes our China JV operations, our operating profit for the year reached 360.5 billion yen, with an operating margin of 3.7%. This is well above our Nissan NEXT operating margin milestone of 2% for FY21. Net cash for the automotive business exceeded 1 trillion yen.

Next is the income statement for the fiscal year ending March 31, 2022, on an equity basis.

Net revenue increased 7.1% and improved by 562 billion yen from the previous year to 8.4 trillion yen.

Operating profit increased by 398 billion yen to 247.3 billion yen, representing an operating margin of 2.9%, an increase of 4.8 percentage points year-on-year.

Net income increased from the previous year by 664.2 billion yen to 215.5 billion yen. We booked non-cash adjustment charge related to Russia and Ukraine businesses. However, this was more than offset by the positive contribution from equity method companies excluding the Russia impact, and extraordinary income, which included the gain on our sale of Daimler shares in Q1 of FY21.

This concludes my summary of Nissan NEXT business transformation progress and fiscal year 2021 sales and financial results. All our performance indicators - operating profit, net revenue, net income and auto free cash flow in the second half - are higher than expected despite unprecedented circumstances. Nissan restored its profitability for the first time after three years. This is the result of our focus on key priorities and steady implementation of the business transformation with speed.

4. FY2022 Full-year Guidance

Coming to our full-year outlook.

We are expecting another year in a very challenging business environment, with the continued semiconductor supply shortage, geopolitical issues surrounding Russia and Ukraine, and the sharp increase in raw material prices, which is accelerating further with these challenges.

We estimate Nissan's global sales volume to increase by 3.2% to 4 million units this fiscal year. Sales volume in Europe is expected to decrease year on year due to loss of sales in Russia and sales in China are expected to remain flat year on year due to the impact of the lockdown and other factors. However, sales in the rest of the markets are expected to grow as a result of new product launches and the easing of the semiconductor shortage.

This is the summary income statement for the outlook for this fiscal year on an equity basis.

Net revenue is expected to increase by 18.7% year-on-year to 10 trillion yen. The rate of increase is higher than that of the retail volume, primarily due to continued improvement in quality of sales and the impact of yen depreciation.

We are forecasting our operating profit to stay practically flat at 250 billion yen, which equates to an operating profit margin of 2.5%.

Net income is expected to decrease by 30% to 150 billion yen, primarily due to the one-time positive impact from the sale of Daimler shares last year, which will not repeat in fiscal year 2022.

In our previous announcements, we mentioned that we would consider resumption of the dividend payment when we generate positive operating profit and net income, positive automotive free cash flow for the second half of the fiscal year 2021, and maintain a healthy level of net cash for the automotive business.

We met all these conditions in the fiscal year 2021, and made steady progress towards achieving the Nissan NEXT goals.

Today, we will propose to pay the fiscal year 2021 year-end dividend of 5 yen per share, to the shareholders as of March 31, 2022, which represents a payout ratio of approximately 9%.

With regards to the year-end dividend for the fiscal year 2022, we expect to pay 5 yen, the same level as in FY2021. As for the interim dividend, given the external environment that is extremely volatile, it is undecided at this time. We would like to make a final call based on the situation going forward.

Improving shareholder returns is one of our priorities. We will work to increase the amount to an appropriate level in the future.

5. Nissan NEXT to Nissan Ambition 2030

Before concluding, let me present what the company will be doing beyond Nissan NEXT.

As I said, we are making steady progress in implementing Nissan NEXT. The company is now at the starting line and is poised to pursue future growth. This is why we unveiled the Nissan Ambition 2030 long-term vision back in November.

Through this vision, we are shifting gears from focusing on business transformation to creating the future, and transforming Nissan into a sustainable company that is truly valued by customers and is an essential part of society. Nissan aims to help develop a cleaner, safer, and more inclusive world where everyone can live together. To make this a reality, we are joining forces with other industries, governments, and municipalities.

The slogan "Together we empower, mobility and beyond" represents our drive. With our spirit of challenge, which is Nissan's DNA, we are delivering value that only Nissan can, empowering journeys and society based on electrification and vehicle intelligence - our strengths.

To date, we have made an early investment of 1 trillion yen towards electrification and advanced technologies, including powertrains, production, and charging infrastructure. In the next five years, Nissan will speed up the shift with further investment of 2 trillion yen.

Nissan will reach an electrification mix of more than 50% by 2030 globally across the Nissan and Infiniti brands. We aim to maintain a steady product momentum by introducing 23 new electrified models including 15 new EVs that offer diversified choices and experiences for customers.

As we move steadily forward towards Nissan Ambition 2030, we are expanding the range of our products leading to an electrification mix of more than 40% with 20 products in the next five years, factoring both EV, including Kei EV, and e-POWER models by 2026.

Given the differences in the speed of electrification among markets, we have aligned with the pace of each market and have set realistic targets. In Japan, more than 55% of our sales will be electrified by 2026.

Here in Japan, we revealed the all-new Kei EV the Nissan SAKURA that was co-engineered with our Alliance partner, Mitsubishi Motors.

The all-new Nissan SAKURA was carefully designed to cater to the needs of customers in Japan in areas including performance, price, styling, roominess, and user-convenience. It has been gaining traction since it was unveiled, and we have received approximately 17,000 orders so far.

The all-new Nissan SAKURA is expected to be a game-changer in the Japanese market, and to give impetus to the democratization of EVs.

The battery is a key determiner of EV competitiveness. Nissan is updating its existing lithium-ion battery while developing game-changing all solid-state batteries. We will begin construction of our pilot plant this year to get it ready for pilot operation in 2024. We intend to start mass production in 2028.

Nissan has thirty years of experience in developing batteries and delivering batteries with no serious incidents for eleven years since the launch of the first-generation Nissan LEAF. This has enabled Nissan to carry out in-house development of all-solid-state batteries with confidence.

All-solid-state batteries will enable us to build EVs with a totally new layout and dynamic performance as well as larger EVs that are difficult to create with existing lithium-ion batteries. We aim to make this technology available as quickly as possible and make our EV line-up even more competitive.

The other pillar of Nissan Ambition 2030 is vehicle intelligence.

Delivering even safer mobility to our customers and society is a key mission of us automakers. As you may be aware, Nissan has been introducing many world- first driver assistance technologies before the competition, making us a pioneer in this domain.

To date, we have sold over 1 million units of Nissan and Infiniti models equipped with ProPILOT advanced driver assistance technology. By 2026, we expect the number to increase to 2.5 million units.

Nissan is currently working on vehicle control technology that utilizes high-performance, next-generation LiDAR technology to make our vehicles even safer, and to move closer to our ultimate goal of zero fatalities. Nissan is partnering with cutting-edge companies with an aim to complete development of this technology by the mid-2020s. It will first be available on select new models, and on virtually every new model by fiscal year 2030.

This April, we presented the engineering status of our all-solid-state battery and driver assistance technology equipped with the next-generation LiDAR technology. It was encouraging to receive positive reactions from the journalists and analysts who joined the events.

We will continue giving you updates on the development status of key technologies that will determine Nissan Ambition 2030 to show you the basis of our vision and the good progress.

Nissan continues working with various partners to drive initiatives to empower society, including development of energy management systems, mobility services, and EV ecosystems using electrification and vehicle intelligence technologies.

Alliance 2030, jointly announced with Renault and Mitsubishi Motors back in January, will act as a boosts for the execution of Nissan Ambition 2030.

As the Alliance, we announced that we will introduce 35 EV models by 2030 and that 90% of these products will be based on common Alliance platforms. By leveraging the economies of scale the Alliance brings, including the adoption of common powertrains, we will be systematically launching competitive EVs while maintaining our respective brand distinctiveness.

As you may have seen in media coverage, Alliance Chairman Jean-Dominique Senardand Renault CEO Luca de Meo were in Japan last month for discussions. This gave us an opportunity to talk about the projects related to Alliance 2030 as well as to hear the details of the new EV company concept that our French partner is studying.

The question is "What can we do together as partners?" More importantly, we need to figure out what kind of benefits it may bring to our company, and how it may contribute to the growth of the Alliance. We will carefully explore matters from every angle, and decide on our own.

The auto industry is in a once-in-a-century transformation. Alliance is definitely a significant asset that others do not have in unlocking our future. Further development of the Alliance and maximum use of common assets will help each company grow.

The Alliance is poised to elevate to the next stage. We will have more opportunities to discuss what it will look like, and how to make it happen going forward. As CEO of Nissan, I will look into every possibility and find the best solution to help grow our company.

Nissan NEXT, which has been making good progress, will reach its final year in the fiscal year 2023. We will keep a tight rein and strengthen our efforts to make Nissan's business foundation even stronger.

We will start working on the next midterm plan, which will be a concrete action plan to achieve Nissan Ambition 2030. I will present the new midterm plan in due course.