Nissan Motor Ltd S/Adr

Welcome to Nissan's first quarter financial results for fiscal year 2026. I'm Lavanya and I'm from Nissan Global Communications. Today's session will run for one hour. We're meeting here and the session is also being live streamed. Let me start by introducing our speakers for today. Ivan Espinoza, Chief Executive Officer. George Leondis, Chief Financial Officer. I will hand over to Ivan to begin the session. Ivan.

Thank you, Lavania. Good afternoon, everyone, and thank you all for joining us today here in Global Headquarters. Before we begin, I would like to express my heartfelt sympathies to all of those affected by the earthquake in Kumamoto Prefecture. Our thoughts are with the impacted communities and we sincerely hope for everyone's safety and swift recovery. I would also like to thank our colleagues and our partners for their resilience, dedication and support during this challenging time. I will now begin with an update on Renison before I turn it over to George to review our first quarter results. Renison is gaining traction with tangible cost improvements and momentum building in key markets. At the same time, we are navigating significant industry challenges and are taking decisive actions to strengthen the resilience, agility and competitiveness of our business. When we share our full year results for fiscal year 2025, we demonstrated the impact that our actions have delivered. We made measurable progress in our cost management efforts to build a new foundation for Nissan's future. Our strategy is now translating into momentum in key markets around the world. However, global industry challenges, particularly in China and the Middle East, have affected parts of our business. This reinforces our focus on building agility and speed into the business to mitigate the impact of shifts and respond to opportunities. Now, first, let's talk about market momentum. The actions we have taken to strengthen our brands and connect with customers is shown in key markets like the United States and Japan. Our business in the U.S. continues to deliver strong retail performance with sales growing more than 9% year on year. This growth is supported by the vehicles produced in the market. Pathfinder sales have increased 32% as the model delivered its best quarter ever, a significant achievement given the 40-year history of the nameplate in the US. Total deliveries of the Frontier pickup grew 35%. Nissan Rogue grew nearly 39% as we approached the launch of the all-new model with hybrid e-power technology later this year. Rogue also earned the top spot in J.D. Power initial quality study, which was just released last month. We also see Infiniti making good progress as QX80 delivered its best Q1 sales performance in the model's history. Our all-new QX65 SUV is now on sale, bringing new buyers into Infiniti showrooms. Importantly, our results were supported by incentive effectiveness, ensuring that spending remains targeted and aligned with growth. In Japan, we are seeing our strong product lineup and enhanced marketing efforts beginning to pay off after a challenging period. Sales in the quarter grew 1%. Deliveries of the Rooks increased by 52%. We also have two important new models and we are seeing very strong demand building up. Since the reveal of the all-new Kicks with e-Power technology, we have collected more than 11,000 customer orders. Our Elgrand Premium band is off to a good start with more than 8,000 orders and deliveries starting last month. These are very strong indications that our plan is working, driving sales momentum in Nissan. And we have seen that continue with July sales pacing ahead of a prior year totals. We are sincerely grateful to our customers for the renewed trust they are placing in our brand. That said, China remains a significant challenge for Nissan and the broader industry. In the first half of China's fiscal year, the total industry volume declined 22% year on year, reflecting a rapidly evolving and increasingly competitive market. Against that backdrop, Nissan's performance has been relatively resilient. In Q1, retail sales increased 7.2% year-on-year, supported by strong momentum from our recent N-series launches. Nissan's total first-half sales declined 50%, outperforming the broader industry decline and resulting in a modest gain in market share. The market transition to new energy vehicles is accelerating rapidly. We have strengthened our position through several recent model launches, and our focus is now to accelerate the shift to NEVs and capture the opportunities created by this transition. Encouragingly, our NEV lineup is already gaining traction with Chinese customers, led by the N6, the N7, the NX8, and our Frontier Pro. We are also expanding our export business with shipments starting from July, creating additional opportunities beyond the domestic market. The uncertainty in the Middle East is another major challenge. While customer demand for Nissan's vehicles remains resilient, we have seen disruptions to logistics and supply chains. We have identified alternative shipping lanes into markets in the region, mitigating some of the impact. However, elevated logistics costs associated with these alternative routes and the ongoing geopolitical uncertainty are expected to moderate profitability until supply chains normalize. Now, let's shift to an update on re-Nissan cost management actions. In Q1, we saw the impact of our efforts grow further, with a combined total of $60 billion in fixed and variable cost savings recognized. Our 20% reduction target in engineering cost per hour has been achieved three quarters ahead of schedule. We have seen strong expense control deliver fixed cost improvements. On variable costs, we are driving greater implementation of ideas generated by our OVIA activities, working in partnership with teams across the company and with our suppliers. Combined with the 255 billion in total fixed and variable reductions that we achieved in FY25, this brings the running impact linked to re-Nissan actions to around 315 billion yen. But the work is not done. Our actions ensure that we remain on track to deliver 500 billion cost reduction by the end of this fiscal year, and we will continue forward. Now, I would like to hand over to George to take you through the Q1 results. George.

Thank you, Ivan, and good afternoon, everyone. As Ivan outlined, our first quarter results reflect both the momentum we are building and the realities of a challenging operating environment. For the three months to June 30th, Nissan sold over 700,000 units. unit sales were almost flat year on year, which is a solid result given the competitive global environment and continued volatility in the Middle East. Turning to our key markets. First, China. Unit sales rose by 7.2% as demand for Nissan's new energy vehicles enabled us to withstand increasingly challenging market conditions in the period from January to March. From April to June, the market conditions weakened further and Nissan sales declined by 15%, but this was versus a 22% decline in total industry volume in the first half. In Japan, we saw early signs of recovery with unit sales rising by 1.3% and strong customer demand for new models such as Kicks. In North America, sales were up by 4.2% and increased by 9.6% in the US market thanks to contributions from the Rogue, Pathfinder and Frontier. In Europe, sales declined by 14.6% amid intense competition and portfolio optimisation. In the rest of the world, sales declined by 16.8%, driven primarily by disruption in the Middle East that Yvonne outlined earlier. Overall, unit sales fell by 2.5% year-on-year, excluding China, and production fell by 4% as we adjusted output to meet demand. Q1 financial performance. Turning to our financial performance, consolidated net revenues rose by 9.5% year on year, primarily driven by favourable foreign exchange rate with additional support from improved revenue quality through pricing and improved product mix. Operating profit reached 77.9 billion yen, an increase of 157 billion from the prior year. net income was 3.8 billion, reversing losses in the previous year quarter. CapEx was approximately 114 billion yen. While this is an overall reduction, we actually increased CapEx spend in support of new product programs. R&D spending was 120 billion, demonstrating our continued investment discipline as part of the Renison plan. In the automotive business, including eliminations, net revenue was 2.6 trillion. Automotive operating loss was 8.3 billion yen, near break even, including the impact of the cost of tariffs. Automotive free cash flow improved to 324 billion yen, an increase of nearly 67 billion yen year on year. However, excluding one-time impacts in the first quarter, the improvement in our free cash flow was actually 100 billion yen. At the end of the prior period, net cash stood at a healthy 970 billion yen. We retain solid liquidity with more than 2.1 trillion yen of automotive cash and cash equivalents on hand. I will now explain the operating profit bridge. Foreign exchange contributed a positive impact of 35 billion, largely driven by the depreciation of the yen against the US dollar. Higher raw material costs, primarily for aluminium and copper, had a negative impact of 24 billion yen. Tariffs had a positive impact of $18.3 billion. Sales performance improved by $23.7 billion due to favourable pricing and selling expenses, particularly offsetting the raw material headwinds I just mentioned. Monozukuri savings contributed around $82 billion, reflecting Renison-driven variable cost reductions. Inflation remained a headwind, with a negative impact of $14 billion. One-time gains contributed $32 billion, including $61 billion related to FY25 US tariffs clawbacks. Other items contributed a positive $4 billion. Taking all these factors together, operating profit reached $77.9 billion. I will now turn to our outlook for the current fiscal year. Although sales volumes were broadly flat in the first quarter, we are indeed revising our full year sales volume outlook to 3.15 million units. This reflects the impact of the deterioration of industry sales in China and the continued uncertainty in the Middle East. As a result, we are also revising our production outlook to 2.8 million units for the fiscal year. The outlook for fiscal 2026, we reaffirm our outlook for revenue of 13 trillion and we reaffirm our operating profit of 200 billion. This represents revenue growth of 8.3% year on year and an operating margin of 1.5%. Net income is expected to be 20 billion yen. The variance analysis. I will now explain the key factors behind our maintained profit outlook. We expect continued pressure from raw material costs, particularly for aluminium, copper and oil-related materials, especially as purchase prices still remain elevated. In the Middle East, geopolitical tensions and shipping constraints are expected to persist, resulting in higher logistics costs and pressure on volumes despite the resilient customer demand. Given the evolving situation, we continue to monitor the impact closely and will update our assessment as visibility improves. There may also be some upside from foreign exchange if the yen remains at current levels. In addition, one-time gains recognised in the first quarter together with offsetting factors are expected to help mitigate some of these headwinds. Taking these factors all into account, we remain confident in our ability to balance those risks and opportunities and therefore we reaffirm our operating profit outlook of 200 billion yen. That concludes my remarks. I will now hand back to Ivan to summarize the quarter.