Nissan Motor Ltd S/Adr

Good afternoon. Welcome to Nissan's first quarter 2024 financial results. Thank you for joining us. First, let me introduce the speakers for today. Mr. Makoto Uchida, President, Chief Executive Officer. Mr. Stephen Ma, Chief Financial Officer. In today's agenda, we will begin with the presentation, followed by Q&A session. CFO Stephen Ma will cover the details of the results of the first quarter ending June 30th, and CEO Uchida will present the outlook for the fiscal year. Now, I'd like to turn it over to Mr. Ma.

Thank you, Lavanya. Good afternoon, everyone. We are announcing the results against challenging conditions and weaker performance in the first quarter. While the result is within our expectations, we are taking immediate actions to address the situation. I will describe it later. Our net revenue rose slightly to around 3 trillion yen. Our profit was adversely affected by several negative factors, which will be explained in later slides. Our operating profit was 1 billion yen and net income 28.6 billion yen. In the first quarter, total global retail sales were flat at 787,000 units. In China, retail sales rose by 3.3% and in Europe by 7.6%. In Japan, sales declined by 8% and in North America by 1.7%. In other markets, sales remain flat at roughly 120,000 units. As we adjust the supply to demand, global production fell by 7.5% to 784,000 units. This slide shows our key financial performance indicators. In the first three months of the year, consolidated net revenue was around three trillion yen and operating profit was one billion yen. Net income totaled 28.6 billion yen and we accelerated CapEx to 100.8 billion yen and R&D to 147.9 billion yen to ensure investment for our future in line with the ARC. Automotive business net revenue was up slightly at 2.68 trillion yen with an operating loss of 74 billion yen and auto free cash flow was negative at 302.8 billion yen. Net cash in the automotive business remained healthy at 1.4 trillion yen. Turning to our performance in key markets. In Japan, overall retail sales declined by 8%. The K-car segment saw a 3.7% increase, driven by good performance of refreshed days and rooks. Our supply caught up at the end of the quarter and order intake is improving. We see a steady recovery from Q2 onwards with the launch of new models and marketing initiatives. Models such as Serena e-Power, Ara, and Daze have shown a very positive trend in sales. In North America, total industry volume growth was slower than expected. Nissan retail sales in North America decreased by 1.7% and in the U.S. by 3.1%. The decline in U.S. sales was primarily influenced by the impacts of the late model year changeover for Rogue and Sentra, aging product in some high margin segments, as well as the market movement towards hybrid vehicles. In Mexico, we retained number one sales position amidst fierce competition from the new entrants. Our commitment to quality was recognized in the J.D. Power 2024 initial quality study with Murano and QX80 earning best-in-segment honors. Here's a little more detail on the U.S. situation. At the start of the fiscal year, we had to manage high inventory levels. The delayed changeover to Model Year 24 Rogue in Q4 last year resulted in increase in center support to sell-down the Model Year 23 vehicles, As many competitors, Malia24 vehicles were already selling in the market. After the strong tactics to promote the Malia23 rogue sell-down, we aim to restore transaction prices and reduce incentives. However, softer than expected industry demand coupled with industry-wide inventory incentive increase led to the elevated spending to keep competitiveness and manage our inventories. This situation will continue into Q2 as we are focused on improving inventory levels as well as a good transition to the refreshed models in the second half. We aim for a 20% normalization of inventory levels during the next few months with a more efficient use of incentive. Further, the introduction of new and refreshed models will help boost sales volume and ensure quality of sales. In Europe, retail sales rose to 79,000 units as we continue to outperform the overall market. Customer orders are showing a positive trend, including for Qashqa and Juke, which is maintaining a strong sales momentum. The electrification mix stands at 49%, reflecting the strong demand of e-power variants, including the refreshed Qashqai e-power. Aria is well received by customers and continue to win awards, latest being named Best Car for Long Distance by AutoTrader. In China, where we are reporting the result of the first half of the calendar year, competition for domestic brand remain intense. The total industry volume share of international passenger vehicle brands decreased by 15% year-over-year. By contrast, the Nissan brands performed well among the international brands, declining only 2.3%. Despite intensifying competition, Sufi maintained its top position in the ICE passenger vehicle segment during the first half of the year. The newly launched all-new Pathfinder has seen positive initial results. turning to the financial performance indicator for the first quarter. The net revenue increased by 80.7 billion yen, operating profit decreased by 127.6 billion to 1 billion yen due to performance in the US and Japan, and net income decreased to 28.6 billion yen. Next slide shows the variance factors for the quarter. Foreign exchange had positive impact of 23.7 billion yen, reflecting the strong dollar benefit net of other currency impacts. Raw material costs had a positive impact of 13.9 billion yen, and sales performance had a negative impact of 110.4 billion yen, reflecting the intense competition and increased selling expenses, as mentioned previously. Monosucre cost was managed efficiently and remained flat despite cost increases reabsorbed. Inflation had a negative impact of 27.1 billion yen, while other items such as sales finance, credit losses, and remarket expenses accounted for an additional 27.7 billion yen as the market is normalizing. Together, these factors reduced our operating profit for the quarter. Despite a challenging quarter, we have maintained our product momentum with a refreshed lineup. We presented a line-up of models including the Arianismo, KICS, Qashqai, and QX80, and started sales of Nord Aura in Japan, Jukin Europe, and Pyfana in China. Uchida-san will now explain the full-year outlook.

Thank you very much. Given the challenges seen in the first quarter, we are revising our guidance for the full year. We expect unit sales to decrease slightly to 3.65 million units. Sales in China are forecast to decrease by 3.8%. Including China, we expect unit sales to be flat. Sales in Japan are likely to reach 500,000 units. In North America, forecast is 1.41 million units, a decrease of 1.4%. Sales in Europe will remain as per our earlier outlook, which is 385,000 units, and other markets at 585,000 units. Production volumes are now forecast to be 3.45 million units. We are revising our forecast for the full fiscal year. As explained earlier, the measures to clear inventory and management of model year changes in the first quarter led to this revision. Revenues are expected to rise to 14 trillion yen. operating profit is revised to 500 billion for the full year this is 100 billion below our previous forecast net income guidance is adjusted accordingly to 300 billion yen capital investment of 620 billion yen and r d spending of 665 billion yen remain at the same level as the previous guidance With regards to forex, it's $1.155, euro is 160.7 yen. That is the forex assumption that we revised to. This slide shows the variance factors behind our revised outlook. This includes a positive foreign exchange impact of 80 billion yen. But we expect this will be offset by a 110 billion yen reduction in sales due mainly to increased selling expenses to reduce inventories in the second quarter. For the full year, we also anticipate 50 billion yen of other costs mainly linked to the used car price decrease. Taking all these factors into account, we have revised our operating profit forecast to 500 billion yen. In the remaining three quarters of the fiscal year, how do we forecast the operating profit? As CFO mentioned, we are on track to normalize inventories in Q2. In the previous year, our total profit between q2 and q4 was 440 billion yen though we uh in 2024 we continue to face inflation pressures and cost increase we anticipate benefits from foreign exchange rates and 200 000 units of incremental volume thanks to the introduction of the new models these factors should enable profit to recover to 500 billion yen This has been a very challenging quarter for Nissan. A combination of corrective measures and new model launches will help drive our recovery. In the United States, we are introducing the Armada Murano Infiniti QX80. In Europe, we anticipate momentum with e-power variants of Qashqai X-Trail Juke and Patrol in Middle East. in japan good demand is expected for the notes sakura serena and days we are working intensively to implement the arc business plan focusing on launching exciting new cars to the customers and speeding up our time to market while enhancing the efficiency and agility of the manufacturing operation with these strategic actions i am confident that nissan will regain momentum I thank you for your patience. I am now ready to address any questions you may have.