Nissan had some not-so-good financial news to report today. Despite a 57-percent net income increase, Nissan was Japan's least-profitable carmaker for the third quarter of last year. A weak yen helped put the company's operating profit below the estimates of financial analysts. In a speech on the financial situation, Nissan corporate vice president Joji Tagawa said "These results, however, do not reflect the full potential of Nissan."

Given our focus on expensive electric vehicles, among other things, we wondered how this might affect EVs. One of the financial analysts told Bloomberg that the news is a "crisis" at the company, but the official word is that things are steady as she goes on the EV front. In his speech, Tagawa reaffirmed the company's strong belief in plug-in vehicles, saying that "Nissan's EV strategy will accelerate with the launch in fiscal 2014 of the e-NV200, the second all-electric model available globally." That electric van has the potential "to transform emissions among commercial vehicles" and Nissan remains interested in initiatives such as EV carsharing in Japan and the continued deployment of charging infrastructure. The speech transcript is available below.

In a statement to AutoblogGreen, Billy Hayes, Nissan's vice president and program director, said that, "Nissan considers zero emission vehicles to be the ultimate solution for realizing sustainable mobility in the future and is strongly committed to EV technologies. Nissan's investment in Leaf and EV technology is positive for the company's business results over the lifecycle, and accelerating sales of Leaf only help to build economies of scale and improve the business model for the technology further."
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FY13 3Q financial results
Nissan Motor Co., Ltd.
Joji Tagawa, Corporate Vice President

Introduction

For the nine-month period, Nissan has made solid progress to improve its business performance. The pro forma nine-month financial results, and particularly those of the third quarter, are up compared to the same period last year, despite intense competition and uncertain economic conditions. These results, however, do not reflect the full potential of Nissan. Looking ahead to the quarter ending March 31, 2014, we expect to continue to improve our business results and as such, we are maintaining our prior profit outlook for the fiscal year.

For the nine months ending December 31st of 2013, Nissan is reporting pro forma consolidated net revenues of 7.94 trillion yen and operating profit of 370.8 billion yen, which equates to an operating margin of 4.7 net margin. For the period, Nissan had a negative free cash flow of 203.6 billion yen which was 79B yen better than the comparable 2012FY period and Nissan ended the period in a net cash position of 733 billion yen, more than double the level at the same point in fiscal year 2012.

We remain committed to our Power 88 mid-term plan, which based on a strong product and technology cadence and improvements in Brand and Sales Power has set market share and operating margin targets for the company. Before going through the financial results in more detail I will outline some of the operational highlights of the period.

FY 13, business update

In the latest reporting period, Nissan unveiled the first models under its Common Module Family architecture, delivering economies of scale and shared advanced technology for the Rogue, the X-Trail and the new Qashqai. It is anticipated that the first CMF program will encompass 1.6 million vehicles per year for Nissan and its Alliance partner Renault when it is fully implemented.

Our expansion of manufacturing capacity continues, with new plants coming on stream including the third Nissan facility in Mexico. This will reinforce our position as the clear market-leader in Mexico, where Nissan's annual output is set to increase by 25% to more than 850,000 vehicles.

Our commitment to growth markets is also reflected by Nissan's sales rebound in China, where we remain the largest Japanese manufacturer. Our China sales in the 2013 calendar year rose to a record 1.27 million units where our presence has been enhanced by the launch of new models such as the Sylphy and Venucia R50X, jointly produced with our partner DongFeng.

Alongside market expansion, Nissan has continued its drive in zero-emission vehicles.
In the latest quarter and for the first nine months of the current fiscal year, the Nissan LEAF has reinforced its position as the world's best-selling EV. The LEAF is now sold in 35 countries and cumulative sales have exceeded 100,000 units in January.

Nissan's EV strategy will accelerate with the launch in fiscal 2014 of the e-NV200, the second all-electric model available globally. The potential of the e-NV200 to transform emissions among commercial vehicles comes as Nissan is also supporting initiatives such as EV car-sharing in Japan and the continued deployment of charging infrastructure.

This past November, we made several important changes to the management and operational structure at Nissan. Across the regions, we made progressive changes to allow management to focus on more detailed market-by-market execution. We moved from a three-region structure to six regions and announced the appointments of Jose Munoz for North America, Jose Luis Valls for Latin America and Takao Katagiri for Asia. In December, we finalized the regional executive team with the appointments of Takashi Hata for the Africa, Middle East and India region, Jun Seki for China and Paul Willcox for Europe. The leaders in our six market regions are now in place to deliver the demanding targets we have set.

Nissan's global presence has been enhanced by our 15-year Renault-Nissan Alliance. At the end of January we announced a major step forward in the Alliance by exploring collaboration in four key functions: Research & Development, Manufacturing & Logistics, Purchasing and Human Resources.

We anticipate that annualized synergies from the Alliance, shared across Renault-Nissan, will exceed 4.3 billion Euros by 2016.

These synergies comprise incremental revenues, cost savings and cross-function efficiencies.

Together, the Alliance sold 8.3 million vehicles in the 2013 calendar year, and can now accelerate areas of potential co-operation.

Having summarized some of our operational highlights, I will go now through our overall performance for the nine months in detail, starting with the unit sales numbers across our operating regions.

FY13, 3Q sales performance

For the nine months ending December 31, overall global industry volumes increased 4.2 to 3.7 million units as strong growth in North America and Japan - which out-performed the industry was offset by pace of our sales recovery in China, particularly during the first 6 months, and volatility in other markets.

In Japan, Total Industry Volume - or TIV - rose by 4.5 sales increase to 466,000 units. Our market share improved to 12.1%.

In China, TIV in the calendar nine months to September 30 increased 12.8 year-on-year to 294,000 units. That momentum continued in the final quarter, in which Nissan's sales jumped 93.8 to 5.78 million units, resulting in Nissan ending the fourth quarter with a market share of 6.6% - up 2.6 points as the political situation has stabilized.

Turning to North America; In the US, TIV increased 8 to 930,000 units, driven by demand for the Altima and Pathfinder models. Market share improved 0.4 points to 7.8 to 73,000 units. In Mexico, Nissan maintained its strong market share position at 24.6%, with sales of 201,000 units for the period.

In Europe, TIV was down 0.5 to 471,000 units in the period. Market share was stable at 3.7 in the third quarter alone, resulting in a 6.5% market share.

In other markets - including ASEAN, Africa and Latin America - economic conditions have been volatile. This impacted Nissan, with sales volumes falling 8.9 at 271,900 units. Latin America fell 15.7 increase in the Middle East to 151,900 units. In addition, while Nissan`s sales in India for the 9 month period were down 22.2, Nissan's sales in India increased 27.5% driven by strong sales of the new Terrano, which was named the Multi Utility Vehicle of the Year in India.

FY13 9-month financial performance

I will now go through our overall pro-forma financial performance for the period. Consolidated net revenues increased 1,180 billion yen, to 7.94 trillion yen, primarily driven by the correction in the yen.

Consolidated operating profit totaled 370.8 billion yen which is up 21.6B yen from FY2012 yielding a 4.7% operating margin.
Net income was 274.1 billion yen, up 41.7B yen or 17.9% on the same period of fiscal 2012.
Looking at the year-over-year operating profit movements in detail:

The 223.4 billion yen impact from foreign exchange came mainly from the correction of the yen against the U.S. dollar.
Purchasing cost reduction efforts, including raw materials, resulted in a net savings of 138.1 billion yen.
Volume and mix produced a negative impact of 41.2 billion yen.
The increase in selling expenses resulted in a 181.9 billion yen negative movement.
R&D expenses increased by 24.2 billion yen.
Manufacturing expenses increased by 24.7 billion yen, and
Warranty and recall expenses increased by 48.4 bn yen.
Other items netted to a year-over-year deterioration of 19.5 billion yen.

Under the equity accounting method for our China joint venture, revenues for the fiscal nine month period rose 19.7 per cent to 7.28 trillion yen. Operating profit was up 9.5 to 274.1 billion yen.

At the end of the period, we continued to be in a net automotive cash position at 733 billion yen, more than 2 times the 333.8 billion yen at the end of December 2012.

FY13 outlook

Looking to the remainder of the year, Nissan will continue to benefit from solid demand in the core markets of North America and Japan, and is seeing signs of improvement in growth markets such as China and Russia.

We will also benefit from our continued new model launch program, with important flagship vehicles coming to market since December, including the Rogue in the US, Qashqai in Europe, Datsun GO in India and the X-Trail, DAYZ Roox and Skyline in Japan.

Supported by these new product launches as well as other cyclical sales factors, we expect to see a significant improvement in our financial performance in the last three months of our fiscal year versus our Q3 results.

Conclusion

In closing, I would like to re-emphasize that Nissan remains committed to continuing to improve the fundamentals of our business. While the global economic environment remains somewhat uncertain, we are maintaining our full year profit guidance, and expect to generate positive automotive free cash flow. We are also maintaining our forecast for the projected FY13 dividend of 30 yen per share.


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    • 1 Second Ago
  • 19 Comments
      brotherkenny4
      • 10 Months Ago
      The term "least profitable" is weird. It means they make a profit, but means negative to many who hear the voice of the masters. Perhaps they are making good capital investments for the future while returning a reasonable profit, instead of selling the future for short term gains to benefit the CEOs golden parachute. Whatever the reality making false negative statements is weird. What is so bad about being profitable?
        Level4
        • 4 Hours Ago
        @brotherkenny4
        Bus 101 you have 2 products both make you a profit. (A)product makes you $10 while (B)product makes you $30
          archos
          • 4 Hours Ago
          @Level4
          False equivalency. We're talking about two different companies, not two different products. (A) Company invests in new technology which will take several years to amortize investment cost, while growing marketshare in new product categories. (B) Company continues to plow along with older product lines to reap higher profit margins (r&d already paid off). Little money goes toward new technology, with most toward refreshes of existing products and lots of advertising to keep the brand fresh. (B) Company which is more profitable now will end up costing you the most, once the company rushes to play catchup with its outdated products. They will have to spend much money in a shorter window of time, will lose marketshare in the meantime, and will see investors flee in droves because management dropped the ball. Perfect recipe for bankruptcy. Toyota was probably less profitable than GM....before they filed for bankruptcy. Anybody who shorted Toyota for them for their hybrid investments is probably alot poorer today.
      PeekOyle
      • 10 Months Ago
      It might help if they stopped building weird clown cars like the JUke.
        gslippy
        • 4 Hours Ago
        @PeekOyle
        The Juke sold 38k copies last year, nearly 2x the Leaf.
      lad
      • 10 Months Ago
      If Nissan can improve the range of the Leaf to 150 miles, they will own the small car EV market.
        David Murray
        • 10 Months Ago
        @lad
        They basically own it now. There are no other pure EVs that sell in any numbers comparable to the Leaf except for Tesla, which is a whole different market.
          archos
          • 10 Months Ago
          @David Murray
          When the Model X comes out Tesla will sell the most domestic EVs.
      CoolWaters
      • 10 Months Ago
      Sales increased. Marketshare increased. There are a number of positives in this report. Just not getting the profit yet.
        Edge
        • 10 Months Ago
        @CoolWaters
        And they won't till they go Hydrogen. ;)
          JakeY
          • 4 Hours Ago
          @Edge
          The first few years it'll be as bad, if not a whole lot worse than EVs. And unlike other manufacturers, Nissan already makes more than enough ZEVs to cover their credit needs, so they don't really need to make the cars for credits either. Looking at the report, exchange rate came first and selling expenses second in negative impacts on their profits, the EVs don't seem to have as much to do with it.
          Joeviocoe
          • 4 Hours Ago
          @Edge
          winky face can describe many things to many people. Please use /sarc or #sarcasm
          chanonissan
          • 4 Hours Ago
          @Edge
          @ Edge, nissan was more hurt by china, china was nissan second largest market, and they sell more vehicle than honda and toyota there, but since the uproar, nissan has not fully recover to full upswing annual sales, but reaching there.
          Edge
          • 4 Hours Ago
          @Edge
          > "It is more difficult to claim sarcasm, when your previous comments have all suggested that you, indeed, believe this." How is it that my post has a ;) at the end? It's not like I added it, when they don't allow edits here. Too funny.
          chanonissan
          • 4 Hours Ago
          @Edge
          @ edge see this statement in reference to china. "fourth quarter with a market share of 6.6% - up 2.6 points as the political situation has stabilized."
          Joeviocoe
          • 4 Hours Ago
          @Edge
          It is more difficult to claim sarcasm, when your previous comments have all suggested that you, indeed, believe this.
          archos
          • 4 Hours Ago
          @Edge
          LOL No automaker who produces a hydrogen car is going to see a profit. EVER.
          Edge
          • 10 Months Ago
          @Edge
          Subtle for a reason, so see who would fall for it. You fell for it, even after I said I was joking, claiming "previous comments". he he
          Edge
          • 4 Hours Ago
          @Edge
          My comment was a joke, as per the sarcastic smiley at the end.
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