Nissan Motor Ltd S/Adr

I would like to start the presentation of the financial results for the first half of the fiscal year 2022. Thank you for joining us. We appreciate your kind attendance. I would like to introduce our attendees, Mr. Makoto Uchida, the CEO, Mr. Ashwani Gupta, COO, and Mr. Sylvie Ma, who is CFO. First, we'd like to invite Mr. Uchida to say a few words at the opening. Mr. Uchida, the floor is yours.

Thank you for taking time out of your busy schedule to join us today. First, COO Gupta will present the results for the first half of this fiscal year followed by my presentation of the outlook of the full fiscal year. Before I begin, I would like to say a few words. As you may be aware, global challenges including semiconductor supply shortage, supply chain disruption, rising energy costs, and raw material prices triggered by COVID-19 pandemic are impacting our business more significantly than our initial expectation. Despite these challenges, Nissan's performance is recovering and we are delivering results that exceed our business plan. We believe this is an indication that Nissan Next initiatives are bearing fruit and improving Nissan's business. Although the severe business environment is still continuing, the entire company will continue to work together on Nissan Next to build a solid business foundation for future growth. CEO Gupta will now explain the results for the first half of the current fiscal year.

Thank you. Thank you. Hello, everyone. I would like to add my welcome to Nissan's first half and second quarter results for the period ending September 30, 2022. We are very grateful for the large number of orders we have received for our latest offerings, including the Nissan Ariya, Sakura Z, Qashqai and Xtrail. As Ujitha said, despite the volatile environment, Nissan continues to deliver on our plans and have shown strong commitment to our business culture, driving value to our stakeholders. Please allow me to take you through our latest results. I will explain the key metrics for the volume and unit sales during the latest quarter. Overall, Nissan has put our production on the road to recovery in most of our market globally. As a result, we expect Retail sales to recover soon globally, excluding China. Production volume rose by 13.6% in the second quarter to 563,000 units. And as we have managed supply chain and COVID disruptions, and output has started to normalize. This improvement was offset by the production challenges in China, where output fell 23.5% to 242,000 units due to continued semiconductor shortages and the impact of COVID lockdowns. As a result, overall production was flat year on year at 806,000. This resulted in a slight decline of 0.9% year on year to 1.618 million units for the first half of fiscal year 2022. Year-on-year retail sales fell 21.4% to 750,000 units for the second quarter of FY22. This is primarily due to the difference in inventory availability. In transit and seasonal inventory were important factors as well. Export model production during the period such as for the Xtrail to Europe and Aria for the United States will be reflected in the sales for subsequent quarters as shipments are completed. The sharpest decline was in China, where sales fell 30.2% to 247,000 units, mainly driven by COVID lockdown and supply shortages. In contrast, sales in our home market of Japan rose nine point eight percent amid encouraging demand for new model and higher production levels. In North America, however, retail sales were down twenty five point four percent to two hundred four thousand and down by twenty point nine percent in Europe to sixty four thousand as inventory shortages. Sales in other markets were down by 15.1% to 118,000 units. Taken together, global unit sales for the first half were 21.6%, lower at 1.569 million vehicles. The next two slides show our key financial indicators on both China JV proportionate basis and equity basis for the second quarter and first half period. On an equity basis which excludes contribution from China JV operations, our net revenue for the second quarter rose by 30% to 2.52 trillion yen from 1.94 trillion yen in the same period of 2021. On the same basis, operating profit for the period was 91.7 billion yen with an operating margin of 3.6%. For the second quarter, net income was 17.4 billion yen. This decline versus the previous year can be explained by the one-time loss from the exit from the Russian market this year and impact of COVID lockdowns. Due to these factors, our net income was slightly lower than prior year. Our automotive free cash flow significantly improved in the second quarter to a positive 206.6 billion yen. Net cash for the automotive business was 1.04 trillion yen on a proportionate basis which includes our china operations our net revenue for the second or second quarter rose 2.78 trillion yen from 2.28 trillion yen last year on pro um Last year, operating profit under this major reached 113.7 billion yen for the quarter, representing an operating margin of 4.1%. In the second quarter, automotive free cash flow improved 284.8 billion yen versus a negative 169.9 billion yen in the prior year. Net cash for the automotive business reached 1.56 trillion yen on this basis. Nissan also continues to maintain strong levels of liquidity. The key highlight of this quarter is that for the first time in last three years, Nissan automotive profit, including intersegment eliminations, became positive. The challenge is to continue in following quarters to strengthen the sustainability of our core business. This next slide highlights our key financial indicators for the first half. On an equity basis, which excludes contribution from our China JV operations, our net revenues for the first half rose to 4.66 trillion yen from 3.95 trillion yen in the same period of 2021. On the same basis, operating profit for the period was 156.6 billion yen with an operating margin of 3.4%. for the half net income was 64.5 billion yen as i previously mentioned for the second quarter the decline versus the previous year can be explained by the one-time loss from the exit from the russian market this year in addition last year there was the one-time gain from the sale of timeless shares excluding the one-time gain and loss our net income was almost flat for the from the prior year free cash flow for the automotive business was a negative 98 billion yen for the first half as previously noted our free cash flow significantly improved in the second quarter to a positive 206.6 billion yen however it was not enough to recover the negative free cash flow in the first quarter which was due to low production We expect our free cash flow to continue to recover in the second half of this fiscal year. On a proportionate basis, which includes our China operations, our net revenue for the first half rose to 5.26 trillion yen from 4.6 trillion yen last year. Operating profit under this measure reached 212.6 billion yen for the first half, representing an operating margin of 4.0%. Automotive free cash flow was a negative 115.7 billion yen for the first half. Net cash for the automotive business reached 1.56 trillion yen on this basis. Now let us look at H1 financial performance. This is the income statement for the six months ending September 30, 2022 on an equity basis which excludes contribution from our China JV operations. net revenue increased by 715.3 billion yen from the previous year to 4.66 trillion yen net revenue increase year on year despite the decrease in sales volume which was primarily driven by the improvement in the net revenue per unit as well as the weakening of the yen operate operating profit increased by 17.5 billion yen from the prior year 256.6 billion yen representing an operating margin of 3.4 percent i will explain about the variance on the next slide Net income for the first half was 64.5 billion yen. This decrease from the previous year was primarily due to one time factors such as said of Amla shares and exit from Russian market. Turning now to the operating profit variance analysis for the first half, this slide shows the variance factors from first half of last year to this year. Foreign exchange had a positive impact of 93.9 billion yen, primarily due to strong US dollar as tailwind, but also headwind in other currencies like Mexican peso and Chinese yuan. The increase in raw metal prices had a negative impact of 122.8 billion yen, primarily driven by price hikes in materials such as steel, aluminum, plastics. Sales performance had a positive impact of 190.6 billion yen. The continued improvement in quality of sales was the biggest contributing factor, with a decrease in incentives as well as improvement in the pricing with value content like pro-pilot, e-force and connected services. Monozukuri performance had a negative impact of 24.7 billion yen primarily driven by cost inflation in manufacturing and logistics. Other items deteriorated by 119.5 billion yen from the previous year. Part of this was due to one-time gains of 35 billion yen last year from the lease of credit loss provisions and increased. used car prices we were also impacted by factors such as increase in cost for regulatory and product enrichment profit decline in the sales finance business due to decrease in assets increased gna and other items turning to the operational highlights of the current year despite facing volatile uncertainties such as inflation forex raw material costs nissan is taking action to build sustainable momentum across our business We are closely monitoring our operations and external factors to remain agile. As lockdowns have continued in China, our total production has been unstable and remains uncertain looking ahead. While uncertain conditions may persist, we have taken effective steps to counteract the impact of semiconductor shortages and recover production during this fiscal year. Nissan has made encouraging progress with our dual supplier sourcing strategy between alternative and standard IC chips. As an example, for one of the major components that caused continuous shortages in fiscal year 2021, we have more than doubled the supply through usage of alternative chips. Thanks to these efforts, we expect to increase our production further during the second half of fiscal year 2022, and we aim to grow our business sustainably amid unprecedented headwinds. Nissan Next is on the right trajectory, driven by three pillars, rationalization, prioritization and focus, and sowing seeds for the future, with the demonstrable progress of our electrification strategy. With both zero emission and e-power equipped as the key drivers, our total global sales for the electrified vehicles has reached 13% for the quarter. our home market of japan is the leading example globally of accelerating says across our compelling zero emission and e-power model range with 52 percent of our sales consisting of electrified vehicles during the quarter this is a result of our customer accepting the value of products from our wide offering starting from k-segment cars to luxury crossovers and with that i will hand over to cheetah sun to discuss our outlook for the remainder of the fiscal year so that