Nissan Motor Ltd S/Adr

Welcome, everyone, to the Nissan Financial Results for the Fiscal Year 2024, the Investor and Analyst Session. This is Julian Krell 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 presentation, I am joined by Ivan Espinosa, President and CEO, and Jeremy Papin, CFO. Mr. Espinosa will begin the presentation with a brief introduction. Following that, Mr. Papin will present the financial results for the fiscal year 24 and the fiscal year 25 outlook. Afterwards, Mr. Espinosa will provide an update on Renison, the new recovery plan. As always, the session will conclude with a Q&A for which additional members are joining today. So, Ivan, thank you very much for your time. and over to you. Thank you Julian and good evening everyone. Thank you very much for joining as we are announcing our results for FY24 and our plan to recover and position Nissan for long-term success in this very challenging environment. Thank you for allowing us, first of all, the time to do a deeper dive into the situation and develop a prudent plan. Since taking office and with the support of our new and strengthened Executive Committee, we conducted a comprehensive assessment of the situation, including an asset review, and made a careful decision to impair production assets in key markets. Today, I will be sharing our recovery plan with all of you in light of the fiscal year results. But before that, Jeremy will cover the FY24 and FY25 outlook. Over to you, Jeremy. Thank you, Ivan. Good evening, everyone. Fiscal year 2024 has been a challenging year for us, and we anticipate that these changes will continue into fiscal 25 as we focus on rebuilding Nissan. We are taking strategic actions to address performance gaps while navigating market uncertainties. I will take you through our financial results for the 12-month period to March 31, 2025. Nissan revenue was $12.63 trillion for the period, down 0.4% year-over-year. Although revenue remained flat, operating profit decreased to nearly $70 billion, impacted by lower volume, a weaker X, pricing pressure and increased costs. As referenced in April, These financial results include impairment charges of nearly $500 billion and restructuring costs of close to $60 billion. Combined, these items, along with the release of deferred tax assets, resulted in a net loss of $671 billion. Later in this presentation, we will address the ongoing recovery of Nissan and additional detail on the necessity of these impairments and restructuring costs. First, I will go through the performance for fiscal year 2024. Total global retail sales decreased by 2.8% year-over-year, with China volumes nearly 100,000 units lower than the previous year. Explained China, unit sales were flat. Revealed by new model launches, North American sales rose by 3%, which offset declines in other regions. Europe was down by 3%, Japan by 5%, and other markets by 1%. In China, retail sales decreased by 12% as we continue to adjust supply to demand and face intense competition from domestic brands. For the fourth quarter, ending March 31, global retail sales decreased by 5%, with China down by 20%. Excluding China, retail sales in the fourth quarter were down by 1%, with 10% decline in Japan, 3.5% in Europe, and 3% in other markets. The decline in consolidated retail sales was offset by a 5.5% increase in quarterly unit sales in North America. This slide highlights our key financial performance indicator on an equity basis for the full year. Net revenue on a consolidated basis was flat at $12.6 trillion. Last month, the financial outlook was revised, forecasting an operating profit of $85 billion. However, following our final audit, the operating profit for the fiscal year totaled $69.8 billion, resulting in an operating margin of 0.6%. Including the impairments of over 460 billion yen, restructuring costs of nearly 60 billion yen, and higher taxes, we are reporting a net loss of 671 billion for the fiscal year. Despite the challenges, we continue to invest in new products, services, and technologies which are critical to the future. This led to higher capex at 577 billion and maintaining R&D spending of 620 billion. Net revenue for the automotive business was $11.4 trillion and operating loss in autos was $216 billion. Due to negative auto profit and increased capex, free cash flow for the automotive business was a negative $243 billion. Automotive net cash for the period was $1.5 trillion flat year over year. Next, I would like to explain the variance factors for operating profit from the prior year to this fiscal. Against the $569 billion operating profit in fiscal 23, we saw a positive impact from foreign exchange of $36 billion. The US dollar was stronger, however, this was offset by declines in other currencies. All material costs had a positive impact of $13.6 billion. The largest negative contribution resulted from the decline in sales performance, which was down by almost $300 billion. This was due to weaker unit sales volume, higher variable marketing expenses, and some lower after-sales revenue. Oil and mercury costs had a negative impact of $7.9 billion, as increased costs for regulatory and product enrichment offset improvements in manufacturing cost, logistics, and R&D. Inflation had a negative impact of $106 billion, with inflationary pressure felt along the monozukuri and G&A functions and affecting our cost-cutting efforts and our supplier cost. Other costs, including seen normalization in credit losses from sales finance and weaker remarketing results, had a negative impact of $135 billion. As a result, operating profit decreased to $69.8 billion. For the fourth quarter, operating profit decreased to $5.8 billion. This was primarily due to a weaker contribution from sales, along with higher raw material costs. Having reviewed last year, let's look ahead to fiscal year 2025. Overall, unit sales for the upcoming fiscal year are expected to decrease by 2.9% to 3.25 million units. This expected decline, which excludes potential impacts from higher tariffs, is mainly from an 18% sales decline we forecasted for China, while we expect retail sales excluding China to be slightly up 1%. Sales in Japan, North America, and Europe are expected to be flat. However, sales in other markets are forecasted to increase by 6%, in particular in Brazil and India. Global production volume is projected at 3 million units adjusted to a reduced volume outlook to manage inventories. This slide illustrates the operating profit variance analysis for the fiscal year 2025 outlook, excluding potential tariff impact. Forex headwinds are projected at 120 billion. We expect a small positive contribution from raw materials. The sales performance is anticipated to improve by $60 billion, in particular through an improved car flow management and new model launches in the second half of the year. Better manufacturing cost management, improved logistics, and the push on total delivered costs are anticipated to positively contribute to 160 billion from Monozukuri, with cost savings boarding as the new plan ramps up. However, these gains will be offset by inflationary costs of 145 billion and other expenses of 45 billion that include higher CO2 emission-related costs. Operating profit is expected to break even for fiscal year 2025, excluding the potential impact from tariff. I will now discuss our assessment of the current situation regarding U.S. tariffs. Our exports from Mexico and Japan account for roughly less than 45% of our total U.S. sales. We estimate that our negative gross impact before any mitigation is 450 billion yen. However, we aim to mitigate this impact through various measures. On the upper right hand side, you can see a list of the measures we are implementing. In Q1, our actions could enable us to mitigate approximately 30% of the expected tariff impact. For fiscal year 2025, we expect net revenue to decrease to $12.5 trillion. The guidance for FY25 operating profit, net income, and auto free cash flow is thought to be determined. The uncertainty comes from the potential impact of tariffs and additional restructuring costs which are currently being assessed. However, for the first quarter, considering the impact of tariffs, we are forecasting net revenue of 2.75 trillion yen and an operating loss of 200 billion. Auto free cash flow for the quarter is expected to be a negative 550 billion. Following Nissan's 7-year pattern, the first quarter is expected to be our most challenging period. As the year progresses, we expect to see steady improvement driven by a refreshed product portfolio and the impact from our cost reduction strategies. For liquidity, we have a total available liquidity of ¥3.4 trillion in the auto business. This includes ¥2.2 trillion of cash and cash equivalents and around ¥1.3 trillion of auto cash loans outstanding to sales finance companies. Additionally, we have ¥2.1 trillion in unused committed credit lines that are fully available. with approximately 600 billion allocated specifically to the automotive business. At the end of fiscal year 24, our automotive debt stood at nearly 2 trillion, of which about 700 billion matures in fiscal year 25. Applying to refinance between 400 and 600 billion of the debt maturing, therefore we expect to end fiscal year 2025 and enter fiscal year 2026 with total debt ranging between 1.6 and 1.8 trillion yen. To sum up, FY25 will be a year of transition for us, a year of decisions. We have enough liquidity to cover our family needs, which will support us as we restructure the business. While FY25 is a year of challenges and uncertainties, the actions we are implementing as part of our new recovery plan are designed to yield positive results in FY26. Thank you for your continued support and confidence in our journey ahead. I now hand back to Ivan. Thank you, Jeremy. As you can see, our full-year financial results are a wake-up call. But reality is clear. Our variable costs are rising. Our fixed costs are higher than our current revenue can support. And as Jeremy said, FY25 is a year of transition. So we are taking a prudent approach and keep our revenue assumptions flat. The reality is clear, we have a very high cost structure, and to complicate matters further, the global environment is volatile and unpredictable, making planning and investment increasingly challenging. Hence, Nissan must prioritize self-improvement with greater urgency and speed, aiming for profitability with less reliance on volume. This is what we are setting out to do with our new recovery plan, Re-Nissan. Our plan outlines three key drivers that will help us achieve positive operating profit and positive free cash flow by fiscal year 2026. These are reducing costs to aim for break-even, redefining our product and market strategy with a sharper focus, and reinforcing partnerships to complement our strategies. Let me talk through in detail. Reduce costs. This is the area where we need to go further and faster. With the help of cross-functional teams, we have reassessed and scrutinized all the assumptions on which forecasts were based in the past. Given our structural challenges and market conditions, we need to deliver more cost reductions on a significant larger scale. Our new target is total savings of ¥500 billion, which includes ¥250 billion from viable costs and another ¥250 billion from fixed costs. We have increased our target for viable costs and we plan to further reduce these costs in FY27 to achieve a solid and sustainable profitability. Now let me clarify why there are two sets of members. We are presenting the targets alongside the most recently announced figures to illustrate the extent of the reductions being implemented. The earlier targets were based on assumptions from the AHRQ business plan. Now, our goal is to establish realistic and measurable targets based on the actual results from FY24. We will be tracking our progress on these targets and reporting in a timely manner. To achieve the magnitude of variable cost reduction, we need a dedicated program and task force. We have already established a new variable cost transformation program to realize maximum engineering and cost efficiencies. Another big area is our supply chain. We are rethinking our supply base to ensure more volume for fewer suppliers and increase efficiencies while benchmarking. We will also be challenging our internal standards for more practical outcomes. With this, we aim for a 10% reduction over three years with the potential for further significant savings in FY27. The task at hand is very big and very challenging. We need a strong governance model to ensure we identify, execute, and achieve our reductions quickly. Hence, we created a sprint team under our Chief TDC Officer who will directly report to the Executive Committee. We have allocated 300 cross-functional and cross-regional experts to divert their efforts and expertise to achieve this goal. They have already organized more than 66 commodities and identified at least 19 different activities. This team has already generated a total of 2,300 ideas, with more than 800 ready for implementation, amounting to $75 billion in FY26. Many more ideas will follow, and we are pushing to bring them faster. Additionally, we will be pausing some advanced and post-FY26 projects, and with this one we will be able to reassign 3,000 employees to work on TDC reduction. This will not be where our production starts for new vehicles, thanks to our shortened development process. The resources we are allocating demonstrate the importance we place in this area and our commitment to succeed in this front. While we work diligently in variable cost reduction, we will seek further efficiencies to reduce our fixed costs. There are several initiatives, but let me highlight some key measures that demonstrate the scale of the actions. First is to restructure manufacturing. This includes consolidating our vehicle and power train plants globally, including Japan. This will require reducing the number of our manufacturing plants from 17 to 10 and increasing utilization rate to 100% by FY27. We will reduce our production capacity to 2.5 million by FY27, with the option to increase it by half a million if demand arises. Additionally, we will utilize our partner plants to support production as needed. We have already taken quick and decisive actions, such as consolidating the pickup production from Argentina to Mexico, reorganizing operations in India with our partner Renault, and stopping investment in an LFP battery plant in Japan. As part of our We Nissan program, we need to implement further workforce optimization, primarily driven by our plant consolidation efforts. We're aiming for a revised global target of 20,000 people by FY27, with roughly 65% coming from manufacturing, 18% from SG&A functions, and 17% from R&D, mostly contractual staff. While this decision is essential for enhancing operational efficiency and ensuring long-term sustainability, we will for sure ensure necessary support to affected employees during the transition. In addition to these reductions, we will focus on lowering labor costs and expenses, expanding the utilization of shared services, and achieving greater marketing efficiencies. In the area of development, we will focus on improving efficiency in three key areas, cost of engineering, complexity, and speed. We aim for a 20% reduction in workforce average cost per hour by rationalizing our global R&D facilities and allocating work to the most competitive locations within the Nissan global R&D footprint. In addition, we are targeting complexity reduction in two major areas. The first is parts complexity, which we aim to reduce by 70%. The second area is platform reduction, and while this takes time, it will help reduce engineering workload in the short term. We plan to cut the number of vehicle, mobile vehicle platforms by nearly half from 13 to 7 by fiscal year 35. And regarding speed, we have outlined efforts to shorten development lead times through the family development concept. We have invested significant energy into this initiative, and we are excited to announce for the first time the first three vehicles that will emerge from this process, the all-new Nissan Skyline, an all-new global C-segment SUV, and an all-new Infiniti compact SUV. Here you can see the timeline for implementation extending through FY27. This timeline reflects our commitment to executing these tasks and underscores our dedication to transparency in our processes. We believe in open communication with our stakeholders and this timeline will serve as a tracker to demonstrate our progress and the impact of our initiatives. We fully expect to be held accountable for our announcements. Now, I would like to explain our second area of focus, our redefined strategy for markets, products, and partnerships. As previously stated, we understand that a sustainable recovery plan cannot rely solely on cost reduction. It must also be supported by strong product offerings. To this end, we will concentrate on developing vehicles in core market segments while collaborating with partners to create vehicles tailored for other markets and needs. Here you can see the segments in which Nissan will develop vehicles and how we will leverage our partners to support other segments and markets. For instance, we will collaborate with Renault in Europe, Mitsubishi in the US, and Dongfeng Nissan in China, not only for the Chinese market but also for exports. We will leverage models from one of these approaches to cover other markets and explore further collaboration opportunities in the US to adapt to the evolving market environment. We will prioritize markets and products to ensure we have the right models for the right markets at the right price points, aligning supply with demand. This involves establishing distinct strategic positions for each region. In the US, our focus will be on crossovers and SUVs with plans to offer more hybrids and reinvigorate Infiniti's market presence. In Japan, we aim to renew Nissan's distinct brand appeal while driving up our average price by leveraging larger size models and signature technologies. In China, we will more effectively leverage our joint venture to lower costs and optimize the production of new energy vehicles. Additionally, we will begin exporting our NEV models to markets outside China, ensuring speed, cost competitiveness, and innovative technologies. In the high-growth Indian market, we will renew our product lineup and maximize synergies within the Alliance. We have already taken a step in this direction by transferring control of our plant in India to Renault, allowing our Alliance partner to assemble next-generation models for Nissan and enabling us to capture export markets. In Europe, we will strengthen our presence by assembling more electrified models in Sonderland and utilizing our alliance relationship with Renault to take advantage of their assembly lines and electric vehicle architectures. Finally, in Mexico and the Middle East, we will capitalize on our strong brand position to sustain the profitable business we have established in those regions. In very simple terms, all our product efforts must be aimed at making the heart of Nissan beat stronger. We will prioritize our portfolio investment around three key objectives. First, we must retain our core business and current customers by providing vehicles that they value. Second, we will focus on geographical and segment growth to attract new customers in targeted markets. And third, we really enhance our marketing and sales efforts for our iconic models, which represent the heartbeat of Nissan, to reignite customer passion for our brand. We take pride in our heartbeat models, which reflect the true DNA of Nissan. They are defined not just by sales volume, but by their iconic design, engineering ambition, and most importantly, by how they fully represent Nissan's values. Additionally, partnerships will enable us to cover various segments and regions with optimized investments, allowing us to refocus our resources on core project priorities. Our focus on core models will be supported by complementary vehicle development in collaboration with our partners. With Renault, we will enhance our collaboration in Europe, India, and Latin America. We are also working with Mitsubishi Motors and Honda to explore advancements in vehicle intelligence and electrification. Specifically, with Mitsubishi Motors, we are collaborating on pickups and EV battery sharing. We will continue to actively seek business collaboration in the U.S. to adapt to evolving market conditions. And in addition to our partnership projects, we are continuing our strategic review process, and we will, of course, provide updates at the appropriate time. We are not only committed to the actions we take, but also the results that they yield. To drive this change, we are establishing a special steering committee to oversee initiatives in all areas. This committee will bring together our best and brightest from both regional and global teams, ensuring comprehensive coverage, visibility, and accountability. I will be chairing this committee with the support of the Executive Committee of Nissan. I extend my gratitude to the senior leaders and the wider executive team for the dedication and the task ahead, as well as to the employees for their invaluable support in achieving our goals. In conclusion, I would restate that our fiscal FY24 results have exposed the urgent need for recovery at Nissan. To safeguard our future, we have to go further and go faster. We have a mountain to climb from the losses we are announcing today. As our path forward, the remit and recovery plan is action-based, grounded in reality, and driven by determined actions. It will not be easy to deliver it. It will require dedication, discipline, and hard work in every part of the organization. But I'm confident that we have what we need to rebuild our company. We need the understanding and support from our valued business partner and stakeholders, as well as collaboration from future partners. And with the shared mission, Nissan people have the skills and ability to return Nissan to its rightful position. As I have stated before in several forums, I truly believe there is no competition that cannot be won by working together as one team. And today we're starting the building of the future of Nissan. Thank you for your attention. Thank you, Ivan. 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. And as a matter of fairness to other participants, please limit yourselves to two questions.

Okay, City Securities, Yoshida-san, go ahead. Yes, thank you for the opportunity. I am Ishida from Citigroup. In fiscal year 2026, you are going to reach a breakeven of OP. That's what you showed us. But on the other hand, with the restructuring, the restructuring will benefit from 2027 onward in particular. At that time, utilization rate will reach 100%. In 2027, utilization rate of 100%. When at this time, what is the operating profit that you are assuming as a target for 2027? That's my question first one and another question is simpler tariffs impact 450 billion yen that you showed us this estimation how what are the assumptions that you use to estimate this for example suppliers bought out parts assumption could you give us the details of the assumptions for 450 billion in tariff impact thank you

Okay, so let me start to answer the first question. The restructuring will not only start from 2027. There's a few things that we are laying down today that will kick in from 2026 and even earlier. We're just looking, or probably you're just looking at the fixed cost side of the equation. But as I explained, the viral cost piece plays a very important role as well. On the viable side, as mentioned, we have already put in place a team of 300 people, and they have found opportunities that add up to 75 billion yen in 2026. And this is before the additional 3,000 engineers that we will dedicate in the coming months to cost reduction efforts. So we can expect to see further improvement before 2027. And there will be a gradual rollout of the measures of restructuring. It's true that part of it will come in 27, but also we will see gradual flows as we go in the years before then. As for the target, what we're saying today is Auto OP for 26 and Free Cash Flow positive in 26. And of course, the targets for 27 should go beyond that. We don't have a concrete number to show today, but of course, it should be piling up and adding on top of this target that we are given. As for the tariffs, I will ask you, Jeremy, to share a bit of detail of the assumptions behind the $450 billion. So as regards tariffs, we shared with you our exposure. The total exposure is 450. I would say roughly two-thirds of the exposure is linked to the imports. and we have shared with you the imports from Mexico and from Japan and within those, even though they are not the same size, they are fairly similar in terms of exposure and the last third of the exposure is

um parts uh parts going into the u.s market for our plants that's that's the breakdown of the 450. okay thank you one additional question for example this 500 billion of cost reduction that you announced for example What's a benefit in 2025, benefit in 2026, and benefit on 2027? What's a breakdown of benefit or cost reduction of 500 billion yen over the years? And then tariffs, parts includes many things. USMCA is part of it, right? And there is an exemption that is given. How far did you reflect for the parts tariffs impact?

OK, let me try to answer the first question. So the targets that we announced today are $500 billion, as you see on the screen, versus FY24 actuals in 2026. So we are expecting the $250 billion of buyable and $250 billion of fixed to come in FY26. And as I said earlier, the visibility we have today for buyable is already in the order of magnitude of $75 billion. As for the tariffs, maybe it's for Jeremy to turn it to you, but can you elaborate on that? Yeah, on tariffs, again, where there is USMCA compliance, there is no tariff. And so what we have used at the moment is what's in market as April and May as a guidance for the full year.

Okay, thank you.

Thank you very much. UBS Securities, Takahashi-san, please go ahead. UBS Securities, my name is Takahashi Kohei. Thank you for this opportunity. What can your company or SM become in the future? That's my point of interest. Page 28 of the slide is the specific slide to which I am talking about. The sums will become between 2.5 to 3 million in capacity, so the regional exposure and product exposure will be unlike what you are today, who you are today, and which resources are you going to be reducing in terms of allocation, and where are the areas where resources will be increased, so in comparison to how you look like today, what will be the recent profile in the future? That's my first question. And the second question is slide number five, and members. Net cash position, 1.5 trillion yen. Unchanged 23, 24, free cash flow is negative. So already, as explained in Q1 and Q3, once again, why is free cash flow negative and yet you were able to maintain net cash? Those are my two questions.

So let me start by answering the first question. Today, we are already at the size of 3 million in terms of sales. As you said, the capacity that we are putting is 2.5 million. However, with flexibility upwards, we can add half a million. And then with our partner projects, we are commanding around 400,000 units. So if we have the need to grow, there is some upper flexibility, as I just explained. In terms of what we plan to reduce and what we will focus on, As you see on the screen, we have defined the core segments and markets in which we will dedicate our own engineering resources. And these areas are the areas in which Nissan excels, namely B and C segments in the markets that you see on the screen. and frame vehicles for North America and Mexico. And also, these vehicles will be exported to some other destinations. Then we are leveraging partners that we have. As you see, we are co-developing projects with programs with Mitsubishi Motors. And we are also co-developing programs in our JV with Dongfang in Dongfang Nissan. And we will do those programs for China, but we will also be exporting those products. And we will continue leveraging what we are doing with Renault. As you see, we're already collaborating in Europe on some of our A-segment products. We are collaborating in India and exporting out of India in the coming years. And we will also be working with them on an A-segment car. So with this, we reduce the necessity of covering every single market and every single product with Nissan-developed products. Our focus moving forward, and it's part of what we're also addressing in our strategic review approach, is we would like to find partners that help us find synergies in the markets in which we have a strong presence. Mainly, you can imagine Japan. You can imagine, of course, the US. You can imagine collaboration also in future advanced technologies, electrification and autonomous drive, which are areas in which we have strength today. And we are looking to have a bit of a lighter balance sheet by offloading some of the older technologies. You can imagine ICE and hybrid potentially could be in the coming years offloaded if we succeed in finding the right partner to do so. So these are kind of a direction that we are taking and how we plan to shape the company moving forward. As for the cash, maybe, I don't know, Jeremy, you can elaborate on that. Yeah, on cash, there were dividends from intersegment companies to O'Tools. So that's what allows us to maintain the cash.

okay the first question could you elaborate i would like to elaborate 2.5 to 3 million units in these regions and product this exposure is too much don't you it's not too much while maintaining this portfolio you are if you reduce the fixed cost operating profit margin will increase is this the thinking Compared to the Japanese competitors and global competitors, your number of products and the sales volume per model seems to be limited. This is one of the reasons for low operating profit margin. How are you going to fix this? What's the action?

As we explained in the presentation, we are also reducing the number of platforms that we are working on. So this will, of course, translate in lower engineering resource utilization. But not only. You can imagine as we go, we need to monitor very closely the portfolio size and have a portfolio size that is matching the size of volume and resources that we have available. So this can give you a little bit of a flavor of what we're saying. We're aiming to reduce the global platform count towards 2032 from 13 to 9 with the final goal of 7, which represents a 46% reduction. These dates represent the time at which the models will be hitting the market. So you can imagine the savings come before because we start investing and working on projects before they hit the market. This is how we are looking at this. And the other area, if you show the three main pillars slide of strategy. On the presentation, we didn't cover that, but we also have a team looking at top line. So we have a team that is looking at the fixed cost. We have a team that is looking at the viable cost. And then we have a team that is looking at the top line delivery. So today, as we mentioned, we have a... approaching to volume, but we have a team that will also be looking at the top line to try and protect or grow, if opportunity exists, the revenue moving forward. So these are the actions that we are taking to try and protect the shape and the size of our company. Thank you.

yes let me follow up again thank you thank you moving on to goldman sachs please go ahead This is Yuzawa asking, do you hear me? Yes, we do. Thank you. I have two questions. The first one, this 500 billion yen of big cost reduction target in the short period of time, I'm sure it was a hard work to define this plan. What is the impact on the bottom line? This year, it's a zero assumption. Tariffs is 450 billion yen. With the tariffs, in fact, even if you reduce 500 billion yen, you can only get 50 billion yen of profit. So, again, 300 billion operating profit, free cash flow plus, there's something missing. Is there any miscalculation that I made? What's all behind this target of making it profitable or a positive free cash flow? Another tough question. The... 1 million units reduction of the volume and additional headcount reduction by region. Which region are you going to focus on the reduction? What's the regional breakdown? And what's the expenses? Not only extraordinary losses for this year, including cash and non-cash, how much additional expenses will be incurred because of these rationalizations? These are the two questions.

So I can take, so the $500 billion of cost savings and we need to be thinking about what are some of the offsets or negatives that we need to face in the timeframe in terms of, for example, of emission-related cost or penalties. or the difference between the level of gross savings and what you would have to actually be able to keep on the P&L while securing market competitiveness. So again, I think to move from the outlook of FY25 To break even in autos, we need several hundred billions of COP improvement, but the 500 billion should cover that and allow us to pay for other negatives that we are forecasting. In terms of regional impact of the restructuring, I think we're not providing details, specifics yet. But as I mentioned, the plan is global and therefore all our operations are being scrutinized and optimized and worked on and would have specific projects to improve their efficiencies In terms of the restructuring charges, we obviously booked some in FY24 At the moment, with what we see in terms of timeline of decision and the timeline of implementation, we believe there could be another $60 billion of restructuring charge in FY25. and most of the FY24, FY25 P&L charges will be cashed out in FY25 and our intent is to fund these restructuring charges through asset sales

thank you the first question maybe my question wasn't clear sorry auto segment profit is what you are shooting for but with the impact of tariffs of course i hope i'm wrong impact of tariffs of 450 billion this is excluding this right this break even even including the terrorist impact operating profit of 300 billion will be reached what's the assumption here

No, FY26 target of break-even is before tariffs.

I see. Thank you.

I hope you can hear me. Yes, we can hear you. I have two questions. First, it will be a follow-up to the previous question, but to confirm your philosophy behind. For fiscal year 26, auto business operating positive. without tariffs. But what if tariffs continue? What's the assumption? What are you thinking about the auto business for 26? Will there be additional reduction of fixed costs, or will you prioritize using partner and not think too much about further reduction of the fixed costs? It will be purely hypothetical, but what's the idea behind? That's my first question. Secondly, Q1. In this fiscal year, this first quarter, you've issued guidance. If possible, minus $300 billion operating profit or operating loss. What's the element? Is it tariff or incentive, or is there one time of cost and free cash flow? There's a big negative for the auto business, so what's the assumption for that figure? Thank you.

Let me elaborate on the first question, and then I'll ask Jeremy to support on the second one. As for the first question, if targets continue, we need to find levers to overcome them. As we explained, or Jeremy explained during the presentation, out of the 450, around 30% we have managed to find countermeasures in Q1. And these countermeasures were applied in the very short term. So we keep working on mitigation levers, including working with suppliers, resource of parts, and also we will have to look at what happens with the market and pricing. And so this will keep monitoring and keep deploying countermeasures, both in the short term, but also in the longer term. We are looking actively at what and how we could reshape our manufacturing footprint in order to alleviate this. And as mentioned in the presentation, also a lever in the mid-term is to find partners to collaborate with and overcome by utilizing the existing capacity that we have. overcome the challenge that tariffs are representing in the midterm. So again, in the short term, most of the mitigation actions will be looking at costs, looking at pricing, and trying to optimize the available capacity that we have. As you know, we have available capacity in our facilities in Zmuda and Canton. We have products that are being prioritized for incentive support and pricing support so that we can balance the overall profitability of the operation in the United States. And in the mid-term, we will look at these additional measures. As for the second question, on the Q1, Jeremy, can you provide a bit of a breakdown of that? yeah so uh our common outlook includes uh the full tariff impact um so there's definitely uh built into this assumption over 100 billion yen of tariff impact so that's uh that's um And then the second question on the free cash flow. Free cash flow in Q1 is going to be in particular affected by the working capital swing that we seasonally experience in Q1 where, you know, we basically pay a significant amount to our supply base. This year we also have specific payments to the supply base that we also will be doing in terms of supporting some upfront R&D and upfront investments that they are doing for us in order to deliver vehicles later in FY25 and in FY26. So a significant part of the free cash flow outlook for Q1 is a working capital impact.

understood thank you okay thank you so much moving to Oka-san securities Naruse-san please yes thank you I am Naruse from Oka-san securities do you hear me yes we do go ahead thank you I have two questions too the first one is power train strategy is this revised power train strategy e-power and ev Did you revise the plan or strategy for these two? In the QA earlier, you said that if you select a partner, hybrid or ICE will be coming off from the balance sheet. That's what you said. What's the intention behind it? Could you elaborate on it? This is my question, first one. And the second question is about China, within China, not exports. In the full year plan, sales in China will come down by 18%. That's your assumption. According to the new cards that they introduce, it is well received. But how are you going to approach the competition in China? And when are you going to restore the performance in China? and the profit in China, within China, of course. It was almost breakeven in the past. While this is deteriorating, of course, it's up to the capacity and there are things which restrict you from this growth. Competitiveness. What are your approach to the competitiveness of Nissan within China?

So let me answer the first question, and then we have with us Stephen Ma, who is the MC Chairman for China. So I will kindly ask his help to elaborate on the second one. As for the powertrain strategy, in the short term, we will deploy hybrid technology, particularly in the United States, with speed. This is something that we are working on very diligently and we have announced already. So we will start in FY25. Later this year we will add a plug-in hybrid barrier to Vogue. And then the year after we will be launching the all-new Vogue with e-power technology in the US. As for the long-term strategy, my comment earlier was more about the long-term strategy and how we see technology evolving. But the key thing here is the timing at which we start doing this kind of shift. But if you take a step back and look in the long term, eventually eyes in hybrid technologies will tend to slow down and to go into a lower volume. And it will become gradually more complicated to be competitive in those technologies. So we are considering, as I said, within the scope of the strategic review, how do we go around this kind of technology, particularly ICE, probably in the first step. And then the power could be needed more with EV, because many of the parts are shared between these two technologies. But conventional hybrid might have to be put in a different strategic approach. And so this is how we are looking at the powertrain strategy today. Again, the environment is volatile, so today we see the market slowing down, but I think in the long term, the full EV and MEV application will come, and we need to get ready for that. Thank you. Maybe I will hand over to Stephen for the second question. Please, Stephen. Sure.

Thank you, Yvonne. It's good to talk to you again, Stephen. Regarding China, your question was the reduction of value year-over-year to 18% for this year, and when to restore performance and profitability level. So let me try to address any of those questions. First of all, as you know, we were a little bit slow in shifting to an EV in China, whereas the China local brand moved very quickly. So just this year, we are now offering the new EVs that you saw in the Shanghai Motor Show, the N7. We are also launching a plug-in hybrid pickup truck, Frontier Pro. is the beginning of our transformation of our portfolio. Unfortunately, the current portfolio we have right now is very old and is predominantly ice. If I look at the way the average portfolio age is, it's more than eight years, close to nine years. That's a very old portfolio, so we are trying to reshape and restructure our portfolio. So this year is a transition year. We are trying to phase into a new car, so it takes a little bit of time to ramp up. This is why we have a very prudent view of the volume for this year. Obviously, I'm hoping that we can do better than this, but right now this is much more prudent and realistic view. That's why the volume is the way it is for this year. Hopefully this will be better for this year, and then next year we can grow again in terms of our volume recovery. The profitability level, we've been able to keep around break-even for the last couple of years, mainly because the local team have done a fantastic job in terms of reducing fixed costs and other costs. Just as a reference for you, since 2021, our headcount has reduced more than 30% and also fixed costs more than 30%. That's how we've been able to keep it at around break-even level. And the capacity, as you know, we've been going down from 1.6 million level to roughly 1.5, and then adjusting the shift patterns and reducing the workforce, your capacity is one million or less. So therefore, we are able to keep very efficient operation with lower fixed costs. And I'm trying to maintain plus or minus level for this year. Obviously, the priority for us is to regain the volume on the scale. We want to maintain this volume or higher. So that's the main priority for us this year. I think you saw from the Shanghai Motor Show explanation, we're going to launch two new energy vehicle this year. And then we're going to be launching a few more next year for a total of 10 by summer of 2027. So please stay tuned for those. Thank you.

Thank you.

Thank you very much.

The next question will be a final question because we are running out of time. Please go ahead. Thank you for this opportunity. First question. What's the meaning of continuing to retail this brand? In the United States, it's $50,000, $60,000. In China and Europe, the volume has gone down quite significantly. So, thinking about the efficiency of engineering, isn't one option to drop EFINITY? According to your presentation, you were referring to strengthening infinity in the U.S. market. So, again, what's the raison d'etre of continuing to have infinity in the lineup? That's my first question. Secondly, in the Q&A, you said in Project TENON, you also have established a Project TENON that considers top nine. So to the extent you can share with us, where are the areas where you think

there's much more value for a paper of the top real still in nissan those are my two questions thank you yeah as for the infinity brand um we want to keep um infinity of course in the us and uh we are of course now considering what we do in china uh as for the u.s um one of the things to to keep in mind is that our infinity products are developed based off nissan so the engineering efficiency is actually positive because we can do more with the same assets and at the same time command a higher price point what we have to do is to strengthen the lineup because one of the problems we have today is that we don't have enough offer on infinity is not a problem of the brand itself. It's a problem of, I would say, lack of proper attention because we were diverting resources into too many places. With this in focus, we want to leverage on the Nissan assets to create a synergy with Infiniti and bring vehicles into the market. with speed, with lower investments, but are able of commanding a higher price point. So this is the reason to keep Infiniti in. A good example of this is the QX80. So today, QX80 is the most profitable car that we have in the company. So this is one of the key reasons to keep investing on Infiniti with an efficient approach that is utilizing Nissan as a starting point. As for the project team, we have maybe a visual there on the material. Again, today we didn't explain much, but this team will absolutely look at opportunities to cover more markets with the same products that we have, controlling VME in a more diligent way. We have a team called a growth acceleration team, which is looking at opportunities for volume by leveraging on cars that are already existing and that we are not capitalizing because we are in a way too busy with the big markets and ignoring the small markets. When you add these small markets, there's opportunities that we can capture. Other activities include portfolio revisiting for the different markets and finding opportunities to improve. This includes vehicle portfolio, but also the lineup and what we call grade walk, the way the options are set, the way the trim levels of the products are set. And there's usually big opportunities in this area, particularly in the big markets like the US and others. So this is what this team is looking at actively.

Understood. Thank you.

Okay. Then thank you very much. We now close the session. Thank you for your participation. And the Nissan Investor Relations team remains at your disposal for any follow-up questions. Thank you and bye-bye.