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.