Nissan Motor Ltd S/Adr

Welcome to the Nissan financial results for the third quarter fiscal year 23 investor and analyst session. This is Julian Kreis speaking, head of investor relations. Thank you very much for joining. The presentation material can be found on the Nissan IR website. Please be informed of the disclaimer included on the last page of the document and read it carefully. Thank you. For today's quarterly financial results presentation, I'm joined by Mr. Ma, CFO. Mr. Ma will start with the highlights of the third quarter, and then he will continue with the financial results, followed by the outlook. We will conclude this call with a Q&A session. I am now handing over to Mr. Ma. Thank you very much for your time.

Thank you. Good evening and good afternoon to everybody. So welcome to the third quarter results for the nine months ending December 31st, 2023. So before addressing our result, I want to express condolences for everyone impacted by Noto earthquake. And obviously our thoughts are with the family, friends, and communities affected. I also want to thank the entire Nissan team and partners for delivering steady results in the face of challenges. So let me begin with our third quarter highlights. Nissan delivered significant improvement on several measures. Net revenue up 22%, operating profit rose 65%, net income more than double versus last year, and we have been very encouraged by rising consumer demand for our products. And we have enhanced shareholder return by restoring interim dividend and buying back shares. For the nine-month period, global retail sales rose by 1.2% year-over-year to 2.44 million units. Excluding China, we achieved growth of 20% as demand improved in key regions including Japan, North America, and Europe. Unit sales in Japan rose by 8.4%, in North America by 30%, and in Europe by 17%. This helped offset the challenging market condition in China, where retail sales declined by 35%. In terms of production, global output remained flat. However, excluding China, production rose by 21% to meet the rising customer demand. During the latest quarter, global retail sales decreased by 2.7% to 819,000 units. While excluding China, unit sales increased by 15% and production rose by 13% amid demand for new models. Globally, quarterly production volume were 843,000 units. Though the third quarter volume was lower, Our condo measure to improve logistics capacity and the start of new model deliveries to dealership have already shown a positive impact on our sales performance in January. Therefore, we are confident to increase our sales performance in Q4. This slide shows our key financial performance indicators on both our equity base and on a proportional basis. On the equity base, Net revenue increased by 22% to 9.17 trillion yen for a nine-month period. On the same basis, operating profit for the period increased to 478 billion yen with a solid operating margin of 5.2% and improved automotive segment profit of 241 billion yen. Net income totaled 325 billion yen and free cash flow for the auto business rose to 182 billion yen. Net cash was at a healthy 1.33 trillion yuan even after the restoration of interim dividend and the share buyback. On a proportional basis, including contribution from our China operation, net revenue rose to 9.8 trillion yuan. Operating profit was 487 billion yuan, representing operating margin of 5%. Given the fast-changing market condition, this is solid performance. Turning to the home market of Japan, retail sales increased by 8.4% to 336,000 units. The main driver was the demand for Serena, Xtrail, Sakura, and Daze, especially the e-power versions of these models. The proportion of electrified models sold in Japan is more than half of our sales at 53%, and net revenue per unit increased by 13%. Production volume increased by 28.4% to 551,000 units. And Nissan has continued to win awards for innovations, including Japan's Technology Car of the Year award for Serena. In North America, overall sales increased by a solid 30% to 917,000 units. In the U.S., total sales increased by 25% to 663,000 units. This reflected strong demand for the Rogue, Kicks, Central, and Versa. North American production increased by 33% to 913,000 units. Net revenue per unit in the U.S. declined by 6%. This was mainly due to model mix as the market moved to more affordable segment and an increase in sales expenses aimed at keeping our relative competitiveness in the face of escalating incentive by our competitors. We are confident that Q4 will experience increase in sales led by the new MOLLE A24 Rogue and Sentra as well as improved availability of models like Versa and Kicks as we improve logistics capacity. In Mexico, the company's fourth largest market, Nissan remains the leader for the 15th consecutive year. Turning to Europe, retail sales increased by 17% to 244,000 units. This improvement was driven by demand for our Qashqai, Xtrail, and Juke, especially for the electrified version of these cars. As a result, the share of electrified models are nearly half our total sales in Europe by 48%. Net revenue per unit increased by 8% and production volume increased by 18% to 244,000 units. Turning to China, the competition continues to be intense. It's a 26% fall in 9-month resale sales to 447,000 units. We have responded with focused actions to help mitigate some of the industry challenges and enhance Nissan's competitiveness, including adjusting our incentives. In the fourth quarter of the calendar year, unit sales rose 19% year-over-year to 247,000 units. Production also rose by 33%. The stronger fourth quarter performance meant that the calendar year retail sales reached 794,000 units, which is in line with the previous forecast. Nissan Silphy has continued to be a top-selling ICE model in the segment for four consecutive years, with cumulative sales of more than 5 million units. Net revenue per unit for the period decreased by 8%, but we are encouraged by the good sales in January, and we will continue to execute plans to strengthen our China performance. Turning to our nine-month financial performance, net revenue increased by 1.67 trillion to 9.17 trillion yen. Operating profit increased by 188 billion yen to 478 billion yen, representing an operating margin of 5.2%. Non-operating income, which includes acclimated company, totaled 62 billion yen. Our results were impacted by extraordinary losses of 98 billion yen, which included impairment costs associated with restructuring in India. Despite that, net income increased by 210 billion yen to 325 billion yen. This slide shows the various factors in the third quarter, year to date. versus last year. Foreign exchange had a negative impact of 6.4 billion yen. Although the US dollar remains strong, this was offset by emerging market currency and the effects of hyperinflation in Argentina. Raw material cost decreased, mainly due to steel and aluminum over the nine month period. And our sales performance had positive impact of 312 billion yen. This reflected strong volume and pricing action, partly offset by normalizing selling expenses across the industry. Mono-suguri costs had a negative impact of 80 billion yen, which reflected retroactive payments to suppliers, inflationary pressures, logistics costs, and regulatory expenses. Other items had total negative impact of 82 billion yen. This includes the effects of normalizing used car prices and net credit losses in sales finance, as well as other items. In this environment, our operating profit improved to $478 billion due to our steady focus on Nissan's next strategic plan for long-term sustainable growth. Based on retail sales performance, Now we turn to the outlook for the current fiscal year. Based on the retail sales performance in the first nine months of the year, we have adjusted our outlook. We are managing the business by executing our strategy with discipline and have therefore adjusted downwards our forecast for retail sales of 3.55 million units. This reflects challenges including intensifying competition and logistics issue in most of our key markets. In China, sales reach 794,000 units, which is in line with our previous expectation. Nissan continues to focus on meeting customer demand with our new models to improve sales efficiency while addressing logistics challenges and intensifying competition. In the fourth quarter of the fiscal year, we expect to see good improvements versus previous quarter. Although the Markets remain competitive. We are taking appropriate actions to navigate the challenging conditions and we are on the right track. We are keeping our guidance on change for net revenue, operating profit and income. This reflects the underlying strength of our business achieved through the Nissan Next plan. However, we also recognize the uncertain environment in which we are operating and we are taking necessary actions. We are currently evaluating the full impact of the Noto earthquake and geopolitical issues around the Red Sea. While we continue to assess this issue, we are keeping our guidance unchanged. In summary, this result has been achieved against a background of market volatility and fast-changing industry conditions. The strategic actions during the Nissan NEXT plan have made our company more agile and resilient. With these strong fundamentals, we are better positioned to navigate challenges that aim for long-term sustainable growth. We are also pleased by the strong reception of our new product as we continue our transition to electrification. To maintain that progress, we are finalizing our new mid-term plan, which we will announce before the end of March. Thank you for your attention. I will now be open to any questions. Thank you.

Thank you very much. We are now starting the Q&A session. If you would like to ask a question, kindly let us know by using the raise hand function. Once we call your name, please unmute your microphone and ask your question. Please speak in Japanese if you are participating via the Japanese Zoom link and please speak in English if you are participating via the English Zoom link. As a matter of fairness to other participants and as a kind request, please limit yourself to two questions.

Okay, Bank of America. Nihon Yanagi-san, go ahead. Yes, hello. Thank you for the presentation. I am Nihon Yanagi. Do you hear me?

Thank you. Good evening.

Okay, hello. Thank you for the opportunity. I have two questions, starting with the first one. North American sales performance in the fourth quarter, are you sure you are hitting the sales target or not? That's what I want you to confirm on. Because for the logistics issues in the second quarter, I heard that the risk of the logistics will be reduced. I think you commented that the risk of logistics will be smaller. In the third quarter, what were the specific challenges that did you face? From outside, incentive seems to be largely increasing. If supplies are short, you wouldn't have seen the necessity to increase incentives. So could you elaborate on U.S. market in particular? What is happening in U.S. market, whether it's a logistics or a competitive landscape? Could you elaborate on U.S. market mainly? And then make sure that you are confident about the fourth quarter. And the second question, automotive free cash flow. Could you elaborate on this as well? Inventories are rising. So in third quarter, it's turning negative. But in the fourth quarter or in the full year, how will the free cash flow become? Will this be better? Am I right? Is there any concerns or things that I have to pay attention to in particular? These are the two questions.

Thank you, Yanagi-san. So a very good question indeed. So first of all, we are very confident of our Q4 sales in the US. What happened in Q3 was several factors. As I mentioned in the media session as well, the main issue was the lack of logistics capacity from Mexico to the US market. we were originally planning to have even more but it was not enough and therefore but we have secured more capacity for q4 in addition to trucks and train rail freight we have now also secure ocean freight from mexico to go in the Atlantic to the US and Canada so that we can have even more delivery. So that is first fairly much a result for Q4, much, much improved. I won't say it's perfect, everything is done, but it's much more improved versus Q3. That's the first thing. Then as you clearly identified, we also have rising inventories at the end of Q3. The inventory has peaked out in January and is already on the way down. And as I mentioned before, it's partially because of logistics. We couldn't get the cars out. or they got to the dealers too late to be retail. So therefore we had a little bit more in the pipeline than we expected at end of Q3. So the question also that you have was about the incentives in the Q3. So what happened was that we had faced in Q3 much more aggressive action by our competitors. I think you know which one I'm referring to, but they had gone very quickly and we had to adjust within the quarter several times our incentive strategy just to make sure we remain competitive. On top of that, we had a little bit more, more than 23 vehicles than we intended. uh originally we didn't think that the market would change so much as you guys saw in the u.s market more were shifted to hybrids or other markets and also they were moving more into affordable segments so we had already ordered and produced and shipped to the u.s many more malia 23 rogues And the market has shifted, especially in the segment where Rogue is, you saw there was a big increase in hybrid sales. So we ended up with a little bit more money at 23 Rogues than intended. And we said before always that we're going to be focused on quality of sales. And obviously quality of sales is not just about raising price and keeping incentive low, but it's also doing the right thing at the right time. We did not want to wait to take care of this issue until later months, so we quickly adjusted and we adjusted our incentives on the model 23 rogue and also some of the areas to make sure that we do not have a. age inventory problem going into Q4. So that strategy or that enhancement of some of our offers and those offers are mainly in APRs. So we try to funnel these customer into our sales finance company. So we did more support on the interest rates for both retail and leases. So that seemed to have worked and that's why we had a big incentive increase temporarily in Q3. So I believe you can see also in the details that for the single quarter of Q3 versus Q2, North America incentive increased by maybe 50 or 60 billion yen. I believe half of that was this kind of a one-off where we had to uh provision more to take care of the malia 23 inventory to give you update on this situation it's been progressing well we are consuming and selling down those stocks as we planned and already the new 24 rogue already been and already in the dealership so The reason I'm confident on Q4 volume is because the Q4 volume has the new Mali-A24 Rogue, which has refreshed exterior and also better connectivity solution with Google built-in. They also have a new Malia 24 Sentra. We have improved logistics and deliveries from Mexico. So you can probably look at industry data and see that our January end dealer stock and company stock will be very healthy. So we have plenty of cars to sell. And the sales in January was going as planned. So that's why Q4, on top of that, we have these new models. We took care of the Malaya 23. Our competition were already in November selling Malaya 24. So we were a little bit late in the Malaya transition. That's what really happened in Q3. Obviously, this will not repeat again in next year. We will make sure we address this problem. and then on top of this q4 the sales volume seems big if you just compare versus q3 But as I mentioned, Q3 is a little bit low because of logistics and also Mali 23 slow sales in the beginning of the quarter. Then we ramped up. But on top of this, in Q4, we have also many contracted sales. with a very good commercial fleet and also rental orders that we sign early in the year that we're going to be delivering in Q4. And to anticipate your next question is wouldn't that hurt our profitability? No, I don't think so because those contracts we were able to secure uh pretty good uh so there's no uh deterioration versus our retail uh sales in terms of profit per unit actually some some of the deals on the fleet is actually better so that's why given all of this i'm sorry for a long answer but given all of this we do see uh that q4 sales in north america and particularly in the us we should be able to do pretty well And also in January, we already saw that some of the competitors who increased the incentive aggressively in November, December, they sort of pulled back a little bit while we kept it. We kept our strategy. So that's why we are very much encouraged by the pace that we have right now. for your second question about auto free cash flow it's very simple in q3 is the inventory as i mentioned it's just two issues one is the logistics two was that we typically produce more in q3 as historical seasonality we sell much more in q4 but to produce all the carbon we need to sell in Q4 we don't have enough capacity within Q4 to produce and sell so we actually intentionally you know historically we always build our production in Q3 to make sure we have healthy inventories for Q4 sales so the reason if you look at the Q3 standalone free cash flow If you go back many years of Nissan history, usually Q3 free cash flow is lower or sometimes negative because of this phenomena. So there's no other issue within the free cash flow other than the inventory being higher. So for year end projection, as I mentioned, the inventory already peaked out in December, January, and it's already being consumed for sales in February and March. Sorry, very long answers to your two questions. Did I address all your points?

Yes, that was very clear. Thank you, Mr. Ma. Okay, moving on to Goldman Sachs Securities. Yuzawa-san, please. Yes, this is Yuzawa from Goldman. Do you hear me?

Yes, hi, good evening.

Yes, hello. You elaborated on the US operations, so now another important market, China. Could you update on Chinese situation? Because of the circumstances, all the car makers were increasing the production volume. But looking at the competitive landscape today and for the MTP, how are you going to revive the Chinese operation? Could you give us a clue on this? That's the first question. And the second question. In the Renault's agreement, you bought back 5%. What was the background here? And the remaining 23% that Renault holds, how will it be addressed? And Ampere IPO, this was canceled, right? So how will this affect your strategy in the investment in Ampere? In relation, this is one big question for Renault Relations. Thank you.

Sure. So for China, As you saw, the market situation in China is very intense. The price war, to be honest, is a bit crazy. And we made sure we were disciplined in making sure that we were not just blindly following in the first three quarters. But just doing business as usual doesn't work in this environment anymore. So we changed and updated our strategy to be much more tactical. and more focused strategy in Q4. We started actually in September. So instead of trying to fight head to head with all the Chinese local brand, which brought all these new brand new battery EV or plug-in hybrids or et cetera, which we currently don't have products yet, but they will come. So instead of trying to fight them in those very fierce battle markets, we turn our focus on markets where customers still prefer very much more ice or the confidence or, how do I say, the trust with established brands. so we intentionally went straight to those markets that were more much more receptive to us so and then we also make sure that we provide competitive offers to those markets so that's what we did so we focus not so much on like the big cities like Shanghai and Beijing which is just a very crazy competitive with a brand of a bunch of new energy vehicle but we went to more two, three, four, five cities where Nissan brand is very much valued still and has a very high reputation. So we focus very much on those cities. So we had targeted offers for each of the different provinces. And then also we made sure that we wanted to be competitive, especially as people buying cars. for Chinese New Year. So by the way, happy Chinese New Year is actually happening tonight. So what we did is typically Chinese customers, especially lower middle class, like to buy new cars right before Chinese New Year to drive the new car back to the home in countryside or the homes outside the big cities. and they already heard a lot about the difficulties with firing EV for long trips and also severe cold weather so they really flocked to our cars because they viewed our cars as much more dependable fuel efficient safe and also a very good feature so we intentionally took advantage of this and we focused very much on strategy for this kind of sales. So it seemed to have paid off and we are working and it's working so far. Going forward, obviously, The battle for the car sales in China continues. We still see continued escalation in some of the office by especially the newcomers and they keep trying to buy market share and gain market share we are just spending a lot of money but for Nissan of course we want to stay relatively competitive so we will make sure we enhance appropriately but not too much but make sure that we are targeting the right audience And as mentioned previously by Ujjesson, we have already put ahead our plans for four new energy vehicles, the first one of which will be launched later this calendar year. So I cannot give the exact timing yet, but it will come later this year as a Nissan brand. So that's our strategy for midterm. And for long term, we already started very seriously on working on a much more detailed offering, comprehensive offering for the China market. And I think Richard-san will touch upon this a little bit more when he unveils the midterm plan. So that's for China. For the second question about the share buyback and amputation situation. So we bought back roughly 4.9 some percent, almost 5%. And this was in December. This was decided by Renault. Any share sell down from the trust is all up to the discretion rental as they see fit. So, but we always maintain if they want to sell, we're willing to buy, which is exactly what we did. So when they approached us and said hey do you have any appetite for some share buyback I said of course how much so immediately we jumped on it and we made sure we bought back and we within a few days we also cancelled those shares to improve the shareholder return so that is for December uh how much or when reno will sell in this year or next year i have no clue this is completely up to reno it's up to them to decide and when they feel ready and they want to do they will inform us and call us and we will be ready depending on how much they want to sell we will decide appropriately at that time so for the ampere ipo obviously i think it's pretty apparent the condition for ipo is not so good these days so i completely understand there are reasons for not going forward with ipo but as i mentioned previously actually our relationship with renault has improved and it's getting better and all our collaboration project with them are progressing as planned. And we are very much looking forward to the Compact EV, which Ucheson, I think, unveiled. Well, he showed the concept version of it a couple months ago in London. I was with him. But that Compact EV will be developed by Ampere for us, according to our specs. Therefore, we are very much looking forward to it. That project is on track and I cannot tell you the timing of it, but it will come soon. So we will hopefully have that ready for sale in the European market. Ampere and what our initial intention with that is, as we said many times before, Ampere is a good investment opportunity as it helps us and complements our strategy in Europe. We already have a good lineup, Xtrail, Qashqai, Juke, Leaf. And we will have refreshed models, just like we showed recently with the new e-Power, Xtrail, Qashqai, and Hybrid, and Juke. But going forward, there are more things that the Renault Group or Ampere might be developing for EVs. And it's a good way to collaborate to help us meet the very fast electrification trend in Europe. So we are, of course, working with them, and there are actually more potential projects in the pipeline. As our position has always been, if it makes sense, it complements and enhances our strategy. Of course, we are interested. So our position has not changed. And if there are some decisions or further progress, we will let you know. I think that's all I can say at this point in time. But the collaboration and relationship with Renault Group and Ampere is actually progressing very, very well. Thank you.

Okay, moving on to UBS Securities, Takahashi-san, please.

Takahashi of UBS Securities, thank you very much for this opportunity. First of all, North America, personnel expenses, your peers, competitors in 2024, is going to increase costs significantly, GM, more than 200 billion. They've already made that announcement. Amongst the suppliers, Mexico personnel expenditure increase percentage is higher for some competitors than the United States. You produce in Mexico. I know that the absolute dollar value is low, but what about the percentage of increase? if you can give us any indication on that point. Secondly, we know you purchased your share back, and regarding the cancellation of the shares you've bought back, do you have any policy regarding cancellation of those shares? you don't put them in treasury, your basic chance is to cancel. So if there are no any specific conditions, you cancel them rather than put them in treasury. Is that the right understanding? Thank you.

Thank you, Mr. Tagore. So first of all, I think you saw in the news, we, of course, make sure that we are maintaining a competitive package for our valued employees in North America. And as a result of the situation in the U.S., I believe a couple months ago, we announced that we will increase 10% wages. So that's already happened. In Mexico, we follow a similar policy of maintaining competitiveness, so we will make sure we move in line with the market. to make sure that we are taking care of our employees. The exact percentage, I don't remember. I want to come back to you on that one. But all I do remember is that we are fairly competitive. And so I have no worries about that. But in general, globally, not just US and Mexico, but globally, the inflation is high, including Japan. I think you have to assume that there will be inflationary pressure on labor costs everywhere. Secondly, about the share buyback. So, Of course, when we buy back, we do want to eventually, our ultimate goal is to improve shareholder return, either via dividend, share buyback, or through improved performance, which increases our share price. So all of these things are various levers for us to improve shareholder return. So it's not automatic or for sure. We don't have a set policy that we will cancel automatically everything that we buy back. But as I mentioned before, in response to Yosemite-san's question, when Renault do want to sell, depending on how big they want to sell, if they want to sell a lot, then we have to think about what to do. But if they continue these kind of increments, of course we have the funding available and the cash available to take it on. To answer your question directly, there's no set policy, but obviously our aim is to improve shareholder return over the mid and long term. Is that okay for you, Takahashi-san?

On the first point, operating profit, how is that going to be impacted in the next fiscal year? Is there going to be any reduction from the previous year? And if you have any numbers that you can share with us?

Oh, for next year? No, right now we are working on the plan for next year, so it's not finalized yet. But I think you should have the confidence that what we did in Nissan Next where we are focusing on reasonable profitability, we will try to continue that for next few years as well. We've done a lot to change the business practices and culture within Nissan. As you know very well, we do not want to blindly chase after volume or market share, but we do want a good balance between volume and profitability. And this is what we're trying to do now. And now that the market is different than it was a couple years ago, there's how to balance and what to balance. This is what we're going to be discussing for our plan for next year. So I think we will be showing the plan for next year in the May announcement when we announce the full year result and also the next year's outlook. So please wait for us to share more of those details to you at that time. Thank you.

Thank you so much. Thank you. Anyone else with additional question? Any more question from the floor? Oh, yes. Mizuho Securities, Ishiyama-san, please. This is Nishiyama. Do you hear me? Yes, we do. Go ahead. Thank you for the opportunity. I have two questions. The first one is about the financials. Could you elaborate on them further? In the third quarter, Q2D, in the operating profit, is there any one-off items which you can unveil? And for the full year guidance, operating profit remains unchanged, but the Forex assumptions and volume have been changed. So operating profit, what are the positive contribution in OP variants? What are the changes? Is there any numbers that you can give us? This is the first question. And second question is about the sales volume in US and China. You elaborated about the Q4. How about Japan and Europe? The fourth quarter sales target seems to be too ambitious. So what's your confidence? What's your perception or assessment here? These are the two questions.

Okay, Ishiyama-san, thank you for the question, and I think I captured three or four, but anyway, I will try to answer all of them one by one, so it's very clear. So Q3, I think it's temporarily, it's a little bit lower than it should be. As I mentioned, we had to take care of the Malia 23 inventory, which was larger than we expected. So we put some more incentive to sell down those stock. That one-off portion of that is probably around 30 billion, in my opinion. I don't think that will be repeated in Q4. That's number one. Number two, as also mentioned in the step chart that you see on the screen right now, we had a lot of costs in monosugari that is for what we call inflation or other things. What this means is in December, we had a finished discussion with our supplier how much of the inflationary costs increase we're going to share with them. So that they incur going to be passed on to us, et cetera. So we settle those inflationary costs in support of our suppliers. So of that amount, it's about $40 or $50 billion gross basis. Of that, about 20, I would say, is really not just for Q3, but for the first half as well. So I would say probably about 20 is not belonging just in Q3, but it should be looked at in over the full nine months. then uh that's the above op to kind of a one-off i would say the incentive additional provision to sell down and then also these kind of a retro adjustment for inflation or other price adjustment that's covering the full nine-month period not just a three-month period Then below OP, we had a couple of items. I'm not sure if you picked up on it, but we actually booked an impairment for India in the amount of roughly 54 billion yen. As we are progressing with our good collaboration with Retinal, we have decided to restructure India operation. and we have several entities and joint ventures together with Renault in India and we decided to rebalance them and also take care of some legacy issues so we decided to impair as part of this restructuring change about 54 billion obviously that will be not repeated again in Q4 Finally, probably somebody will pick it up, so I might as well mention and highlight this. But in Q3 also, given the interest rate declining in China, and then also we want to have, making sure that we have plenty of cash here in Japan, in case more shares sell down by Renault or other investors needed. So we moved some cash from China to Japan in the form of dividend. And so we took a big dividend from China to Japan. and but in the past we didn't do that because in the past we just left the cash in china because it was much higher interest rate in china that we could get income on so but as we did this we changed our dividend policy so as changing the policy and we trigger from a tax point of view having to book deferred tax liability for the under distributed dividends as well or retain earnings so This is a little bit extra tax expense for the quarter. But this is purely because we are opening up the possibility of moving cash in and out of China a little bit more. So these are, I would say, four items in Q3 P&L. And that's slightly distorts or makes it look a little bit lower than actually normally the trajectory would be. So as you can understand from these four factors, going to Q4, I will not have a repeat of the incentive because I already have all the Malia 24 in the dealerships now. And the sell down of Malia 23 is going very well. The retro-adjustment for supplier already done. So if we do anything more, it will only be for one quarter's worth. So it will be not big as we had in December. And then I will not do another impairment in Q4 for any operation. And then we already took the tax liability, deferred tax liability for the ownership of the China retained earnings in Q3. So I won't have a repeat of these factors. of these negative factors on top of that actually as i mentioned we will have improved sales because we have now all the new model years which has refreshed exterior interiors we have more availability we took care of all the logistics issues so we actually have this vehicle ready to be sold and available for dealer to sell We have updated our sales strategy so that we are now relatively competitive via survey of competition in the marketplace. And I would say, lastly, some of our sales in the US, as I mentioned, is already confirmed via contracts, contracted order that we're going to be delivering. So to be quite frank, I think Q4 is already set up for being a good quarter. So Q3 is a little bit low, but Q4 will be on a good trajectory. Your question about my confidence or the Q4, I think I'm pretty good for that. And I think I just gave you all the one-offs for Q3. This is why we're keeping the full year guidance at 620 billion yen. As you notice, we updated the Q4 yen rate to 145 yen. And I think today, yesterday was 147. Anyway, or today, I forgot to check today. So we might have a little bit upside on that one. So even though the volume has come down, the retail will be adjusted down by almost 150,000 units. As you know, what drives the financial is the wholesale. The wholesale adjustment that we did from the previous guidance is only 75,000, so only less half of the retail drop, which means that the financial impact is not as big. And on top of that, because we know the situation and we understand, we learn from our Nissan X, all the good principle and management practices, we are keeping a very good focus on cost and control it as much as possible. Of course, there will be inflation and other costs, but all the other costs we are watching very carefully to make sure we don't have a huge escalation in fixed cost. So a combination of FX cost control is enough to offset the volume drop versus the previous volume guidance. So that's how to understand the 620. Finally, you asked about the sales volume other than US and China, which is Europe and Japan. Situation is very similar. In the Europe market, I think the increase on Q3 to Q4 is almost 40,000 units increase. Half of that is where we are readjusting, updating our strategy. So we are making sure we are competitive in our offerings in terms of price or incentive. Also, we pumped in more in marketing. So we intensify in marketing. So that's about half of the 40 and then about another 8 or 9,000, maybe 10 is because annually in UK, the license plate change in March. So usually we get a bump from that since we are very strong in the UK market. And lastly, the last 10,000 roughly is because we have improved supply of the EVs, the Leaf and the Aria as we got deliveries, which was a little bit held back in Q3. So Europe, no issue for the growth in Q4 versus Q3. Similarly for Japan, we have the new model year 24 notes and days. Based on what I've seen in January sales, they're going very well. The new Serena e-Power, we're getting more supply of that and it's very, very popular. I already sold several of them to my friends and other colleagues. I know they're very hot demand and then we also have improved supply of Aria and Sakura. So therefore Japan is also poised for a very good Q4. Sorry, very long answer Ishiyama-san. I tried to address like four or five questions you had embedded in your two questions. Is that answer all your concerns?

Many questions. I'm sorry about this. Another one, quick follow-up. One of items, the supplier costs 20 billion yen. This is a nine month, it's 20 billion yen for nine months. Am I right? Understanding this right?

The actual number is much bigger. I'm just isolating of that bigger number, how much would be, should have been more belonging to first half. It's about 20 billion that should belong more in the first step, not in Q3. That's what I'm trying to say. But we could not book those in first step because we had not yet agreed and settled with our suppliers. So does that make it easier to understand?

Yes, that was very clear. Thank you.

Are there any other questions?

If not, the session is closed.

So thank you very much for the participation today. And of course, the Nissan IR relations team remains at your disposal for any follow-up questions. Thank you. Bye-bye.