Remarks from Nissan CEO Carlos Ghosn and Chief Competitive Officer Hiroto Saikawa from the 115th Annual General Shareholders meeting
Saikawa CCO: speech delivered in Japanese
2013 was a milestone year for Nissan Motor Corporation. As you may know, we commemorated our 80th anniversary. Datsun, the iconic brand in the history of our growth is back in fast growing markets. We are halfway through the six-year midterm plan, Nissan Power 88. The organization is totally ready to embark on the second-half of the plan with strategic investments and stronger management structure in place.
I will now provide an overview of the company's global and regional sales for FY2013, as well as some of the business highlights.
FY2013 Sales Performance: Global
During FY2013, overall global industry volumes reached 83.1 million units, a 4.8% up from the prior year. Nissan outperformed the industry with sales up 5.6% at 5.19 million units. This equates to a global market share of 6.2%. Though our volume fell below the initial expectation, our sales hit record high.
Sales Performance: Regional
Here in our important home market of Japan, total industry volumes rose by 9.2% to 5.7 million units. Nissan out-performed the market with unit sales up 11.1% to 719,000, achieving a market share of 12.6%.
This improvement was driven by strong sales of our DAYZ series; as well as high demand Serena minivan and the new X-Trail. It is important to note that the sales volume increase, particularly in the fourth quarter, was impacted by Japanese consumers making purchases prior to the consumption tax hike. We took this into consideration as we planned for the year and thus maintained our strong momentum in Japan.
In China, where our sales performance is measured on a 12-month calendar year, Nissan out-performed overall market growth. The total industry volume in China was up 14.2% to 20.75 million units, while Nissan sales increased 17.2% to 1.27 million units.
Although our performance was impacted by the islands dispute in the first half of 2013, demand has been normalizing. The Qashqai and the all-new Sylphy, along with new models from Venucia and Infiniti, contributed to this improvement.
In the key market of North America, Nissan achieved significant sales growth.
In the U.S., total industry volume was up 6.4% at 15.65 million units. Amid strong demand for the new Rogue and the Altima, Nissan sales volume increased by 13% to 1.29 million units.
In Canada, Nissan outperformed the market as unit sales jumped 20.9% to 96,000 units, compared with the industry which was up 4.6% at 1.7 million units.
In Mexico, Nissan maintained its number one position with a market share of 24.9% and unit sales of 265,000. Nissan accounts for five of the top ten models in Mexico and ranks first in customer satisfaction.
In Europe, including Russia, where the market recovery is gathering pace, Nissan sales rose 2.4% to 676,000 units, compared with a 1.8% rise in the overall market. Nissan's market share was steady at 3.9%.
Growth in Japan, China, North America and Europe contrasted with continued volatility in other markets.
Asia and Oceania were significantly affected by adverse exchange rate movements and policy changes. In these markets, sales declined 17.8%, to 363,000 units.
We faced similar challenges in Latin America, as well as an additional obstacle in Brazil. Due to changes in Free Trade Agreements, our ability to import vehicles from Nissan Mexico was dramatically reduced. Sales in Latin America ultimately fell 16.1% to 186,000 units. However, we have taken steps to drive significant improvements, which the CEO will discuss shortly.
Sales reductions in these markets were partly offset by our strong performance in the Middle East, where new Patrol has energized our brand. This contributed to a sales increase of 22.5% to 226,000 units.
Nissan saw positive improvements in other high-potential markets. Most notably, in India, we began selling the all-new Datsun GO, and consumers are reacting positively to the new Terrano. We are focused on significantly expanding our dealer network across India to keep pace with rapid market growth.
FY13 Notable Activities
Another area where we saw progress in the last fiscal year was with our Infiniti premium brand. Driven by Infiniti's strong performance in China, its global sales rose by 4.0% above FY12 levels.
New Products & Technologies
Nissan's success continues to be fueled by launching innovative, exciting products and technologies. During fiscal year 2013, we launched 10 new vehicles, including: two new mini-cars, Dayz and Dayz Roox, and the new X-Trail, in Japan; the Teana Long-Wheel Base in China; in India, the new Terrano and the first Datsun model, the Datsun Go; in the U.S., the Infiniti Q50, Rogue and the new NV200; and in Europe, the new Qashqai.
Of the 90 new technologies we plan to launch during the NP88 term, 22 arrived last year, including our "Direct Adaptive Steering" and "Forward Emergency Breaking" systems, and several other "world-first" technologies. We also continued our development of long-term innovations, including our Autonomous Drive technologies.
FY2013 was a year in which we worked on business expansion for future growth. During fiscal year 2013, we made record investments to grow and enhance our operations. In fact, our capital expenditures peaked as a percentage of revenue. With these investment burdens now behind us, we expect investment costs to be flat or to decrease during the second half of the Power 88 term. At the same time, we will reap the benefits of our newly installed capacity.
In Brazil and Mexico, we opened new plants. We expanded operations at plants in Russia and India. We started production in Vietnam. We began a capacity-development project in Myanmar. And we executed expansion plans for our plants in Thailand and Indonesia.
We also maintained our number-one position in the electric vehicle segment. In January, we passed the accumulative 100,000 mark for LEAF sales. We achieved our objective to sell 50,000 LEAFs during fiscal year 2013.
LEAF sales expanded in every region - with an increase in Japan of 21.4%, an increase in the U.S. of 108.6%, and an increase in Europe of 96.7%.
It is clear that EV technology, pioneered by Nissan, finally has global traction -- from the U.S. to Europe and Japan, all the way to Bhutan. In Bhutan, zero-emissions transportation is top policy priority, and there was a lot of progress toward the environmental goals during fiscal year 2013. We delivered the first Nissan LEAFs to this market and forged an agreement to establish government and taxi EV fleets using Nissan products and technologies.
FY13: Consolidated Financial Performance
I would like to briefly run through our overall financial performance for fiscal year 2013.
As we have done for several quarters now, Nissan is presenting its financial performance in two ways. The first is on a management pro forma basis, which includes the results of our business operations in China - one of our most important markets. I consider this the truest picture of our business.
Management Pro Forma Basis
On a management pro forma basis, consolidated net revenues increased by 18.7% to 11.43 trillion yen, primarily driven by the correction in the value of the yen and the impact of sales volume increases. Consolidated operating profit was up 15.7%, at 605.7 billion yen, yielding a 5.3% operating margin.
For the full year, net income was 389 billion yen, up 13.6% on the same period of fiscal 2012. We ended the year in an automotive net cash position of 1 trillion 133.7 billion yen, compared with 915.9 billion yen at the end of March 2013.
Official Basis/Equity Accounting Method
Let me switch to the second presentation method. This is our official reporting to the Tokyo Stock Exchange that meets regulatory requirements. These are the numbers you find in your convocation letter. On this basis, the results of the Chinese joint venture, of which we own 50 percent, are not included in the consolidated net revenue and consolidated operating profit.
Using it, revenues for the 12-month period rose 20% to 10.48 trillion yen. Operating profit was up 13.6% at 498.4 billion yen; and net income rose 14% to 389 billion yen.
As I mentioned in the beginning, though FY2013 results fell short of our initial expectation, Nissan Motor Corporation delivered profit in line with its revised full-year guidance, generated free cash flow of a positive 208.1 billion yen, and strengthened its balance sheet. It was also a year in which we took various initiatives in anticipation of the second half of the Power 88. I will now turn the program back over to Mr. Ghosn. Thank you.
Thank you, Saikawa-san.
Nissan Motor Corporation is on the right path. In the 15 years since I first addressed Nissan's annual shareholders' meeting, our sales volume has doubled. We've moved from sustained deficits to consistently generating profits in our business. Nissan has expanded its global presence into every major market - and paved the way in high-potential regions worldwide. Here in our home market of Japan, we are now strengthening our position in segments ranging from mini-cars to cross-overs to electric vehicles.
Nissan created significant forward momentum in 2013. Although we did not move ahead as far or as quickly as we would have liked, it was a year of progress. We saw record sales. We deepened our strategic partnerships. In Japan and around the world, we made substantial investments in new production capacity, products, and technologies. We also maintained our focus on fiscal discipline.
As a result, our automotive net cash level has never been higher. Our brands have never been stronger. Our position as the industry's leader on sustainable mobility remains unmatched. And our ability to bring new technologies to the marketplace has never been more effective.
In the year ahead, we will build on these accomplishments - and closely align all activities to the goals of our 6-year business plan, Nissan Power 88.
Nissan Power 88
We have reached the half-way point of the Power 88 term. During the first three years, we grew our volume by one million units. In the second-half of Power 88, we plan to exceed this. With a comprehensive, aggressive strategy in place, we expect to achieve an 8% operating profit margin by fiscal year 2016. A global market share of 8% will remain our target.
In addition to improving our sales performance, we will focus relentlessly on increasing profitability, and - most importantly - fulfilling our potential. Although Nissan is in a healthy financial position, we are a better company than our fiscal year 2013 results convey. We have industry-leading products and technologies. We have the resources, employee talent, and management structure necessary to challenge our competitors. And we have the right business plan with Power 88, which will underpin the full scope of our operations throughout 2014.
I'd now like to outline what you - our shareholders - can expect from Nissan this year.
FY14 Global Outlook
For fiscal year 2014, Nissan anticipates total industry volumes will rise by 1.6% to 84.4 million units. We expect Nissan to improve significantly with retail volumes reaching 5.65 million units. This would equate to a record global market share of 6.7%.
FY14 Regional Outlook
In Japan, we will build on our strong performance in the mini-car segment with enhanced marketing efforts for our successful Dayz series. We will also focus activities on other high performing vehicles, such as Serena and Note. To further boost sales of the zero-emissions LEAF, we will continue efforts to expand the EV charging network throughout Japan.
Although we foresee continued pressure on Japanese consumers due to the recent sales tax increase, this will be more than offset by sales growth outside of Japan.
In China, our sales are forecast to grow more than 17%. Production will be boosted by the opening of our 4th China plant, in Dalian. We'll also start local production of two Infiniti models, and begin localized production of a Venucia-branded electric car that utilizes Nissan LEAF technology.
In the United States, we also expect significant improvements. Already, May sales were up 18% above 2013 levels, and ahead of the industry pace. The LEAF is breaking new monthly sales records - with 3,000 LEAFs sold in the U.S. in May.
In the European market, where we are seeing signs of recovery for the first time in five years, we will additionally benefit from the full-year effect of the new Qashqai and new X-Trail, and the introduction of a new C-segment hatch-back.
We will keep working to establish Nissan as the number-one Japanese brand across Europe - a position we already hold in the United Kingdom, Austria and Slovenia.
In Latin America, we anticipate a significant rise in sales- especially in Brazil. This will be fueled by increased supply, thanks to new plants in Resende, Brazil, and Aguascalientes, Mexico.
With new product offerings in India, the Asean and Oceana markets, and the Middle East, we expect significant growth of our sales in these markets, as well.
Finally, just as we did last year in Myanmar and Bhutan, Nissan will continue to drive into untapped markets. During 2014, we are beginning production activities in Nigeria - the largest and most affluent market in Sub-Saharan Africa. Nissan will be the first major auto brand to localize production in Nigeria.
FY14 Key Business Unit Opportunities
On a global scale, we expect several key business units to drive growth - most notably Datsun and Light Commercial Vehicles.
During 2014, we expect the reinvigorated Datsun brand to drive strong sales in high-potential markets worldwide. In the last fiscal year, we began local production and sales of the Datsun GO in India. Since then, production and sales of the Datsun GO-plus have started in Indonesia.
In April, we unveiled the all-new Datsun on-DO in Moscow and look forward to beginning Datsun sales in Russia in September. Earlier this month, we showcased the Datsun model that will be sold in South Africa, where Datsun once held the "number-one" brand position. During 2014, we will continue to evaluate potential expansion opportunities for the Datsun brand.
Light Commercial Vehicles
We are also working to maximize output in our Light Commercial Vehicles unit - and to establish Nissan's leadership in the growing global LCV market. To increase sales and profitability, we have reorganized the business unit to ensure more synergies with Renault. We are targeting 2 million units in sales - double our current annual level. We continue to expand our international LCV taxi program. And we are planning aggressive roll-outs of our new electric-LCV, the e-NV200; as well as our new global pick-up truck, the Nissan Navara.
FY14 Financial Forecast
Based on this outlook, we anticipate a rise in net revenues for fiscal year 2014.
Because China is one of our most important markets, I first want to provide you with our anticipated results, including China. As Saikawa-san mentioned, we call this reporting method "a management pro-forma basis." We believe it provides the most accurate picture of our full business operations.
Using this method, we expect net revenues will rise by 4.5% to 11.95 trillion yen. Operating profit is forecast to reach 680 billion yen and net income is predicted to be 405 billion yen.
However, regulations now demand that we exclude our China business in our official reporting to the Tokyo Stock Exchange. Using this method and excluding China, we expect to see net revenues grow by 2.9% to 10.79 trillion yen for fiscal year 2014. Operating profit is forecast to reach 535 billion yen - representing a margin of 5%. Net income is expected to remain the same.
FY14 Dividend/Shareholder Return Outlook
With record high automotive net cash levels, and expectations for continued automotive free cash flow generation for fiscal year 2014, we are forecasting a 10% increase in the dividend to 33 yen per share. In addition, over the balance of the Power 88 mid-term plan, we are increasing the minimum targeted payout ratio from 25% to 30% of net income.
Clearly, we have high expectations for the year ahead. I'd like to briefly present 5 key focus areas of our strategy:
New products & technologies; Enhanced brand power and kotozukuri efforts; Broad quality and cost reduction activities; Deeper Alliance synergies; and Meaningful philanthropic activities.
New Product Launches and Technologies
In the coming year, we will launch 10 new vehicles. These include the new Murano in the U.S., the new zero-emissions e-NV200 in Japan and Europe, an all-new global pick-up truck, and long-wheel-base versions of the Infiniti Q50 and QX50 in China.
As we deliver new models, we will continue to maximize efficiencies. A key part of this effort will be our Common Module Family - or "CMF" - strategy, which will support approximately 6 million units of volume for Alliance vehicle production. It has the potential to significantly reduce costs, simplify our engineering and manufacturing processes, and enhance vehicle quality and versatility.
In 2013, we introduced the first models delivered through the CMF initiative - the X-trail for Japan, the Rogue for the U.S., and the Qashqai for Europe. These vehicles have been met with high market demand.
Today, I want to recognize the team that oversaw our pioneering CMF efforts and delivered the first CMF models - on time and with top quality. This team recently received the Global Nissan President Award for Employees for their contributions to our ongoing product offensive.
In addition to our portfolio of new models, we will introduce 5 new technologies this year. These include innovative safety enhancement features such the "Smart Rearview Mirror" - the world's first LCD rearview monitor. It provides clear visibility under various conditions; it also allows the driver to switch between the LCD monitor and the traditional mirror.
As we deliver new innovations to the market, we will continue to develop our breakthrough zero-emissions and zero-fatality efforts - including our Autonomous Drive technology.
At last year's Nissan 360 event, we showcased our Autonomous Drive capabilities to the world. We also pledged that Nissan would be ready to deliver vehicles with Autonomous Drive to the market by 2020. Until then, we are progressively introducing components of this technology into new vehicles.
Just as we did with electric vehicles when we introduced the LEAF - which is now the world's best-selling EV - Nissan wants to lead the industry in Autonomous Drive. Here in Japan, we became the first automaker to obtain a license plate for public road testing of an autonomous driving vehicle. And - with Prime Minister Abe along for the ride - we have showcased our Autonomous Drive technology on Tokyo's streets.
I'd like to show you just how far we have come.
This is a video of one of our LEAF vehicles using the latest Autonomous Drive technology to journey from our global headquarters in Yokohama to our Oppama research center more than 25 kilometers away. This vehicle is utilizing our "Following System," which automatically adjusts speed to maintain a safe distance from the vehicle ahead. This system will be further developed over the next two years and launched in 2016.
Brand Power/Kotozukuri Efforts
Generating excitement about our innovations, products, and brands is critical. This will help Nissan to improve pricing power and, ultimately, provide greater returns to our shareholders.
The Nissan brand has never been stronger. Over the last three years, we were the fastest rising brand on the Interbrand survey - with Nissan now ranked 65th among all global brands. But we have much further to go. We will continue to focus on brand consistency, brand enhancement, and brand engagement.
During 2014, a key part of this will be strengthening our online presence. This year, we are launching a new global digital architecture. It will underpin all future digital and social media activities. It will also provide a globally consistent brand identity - and a much more interactive customer experience online.
This platform will complement the work of the Nissan Global Media Center, which continues to share our company narrative by creating story segments. By the end of 2014, these segments will reach over 24 million cumulative viewers, watching almost 700,000 hours of branded content. It will also enhance our current marketing activities, including our global "What If?" brand campaign - which is now present in 85% of international airports.
Our digital activities will further bolster the "real-life" sports partnerships we have established with multiple sports teams and organizations worldwide. As a result of these efforts, the Nissan brand will be featured during - and at events in advance of - the 2016 Olympic games in Rio de Janeiro, the Africa Cup of Nations, and the UEFA Champions League. For Formula One racing, the Infiniti brand continues to be the most visible brand on the grid - thanks to our partnership with the most successful team, Infiniti Red Bull Racing.
Here in Japan, our ongoing partnership with the Yokohama F- Marinos will continue.
In fact, just last month, as part of an effort to create further opportunities for the J-League and for Nissan's increased visibility, we established a new partnership with City Football Group - which will become a minority stakeholder in the F-Marinos team.
These activities are just a snapshot of how we are fueling enthusiasm for the Nissan brand and, in turn, elevating our pricing power.
Product Quality & Cost Reduction Efforts
Increasing our pricing power also depends on our ability to consistently deliver competitive vehicles that meet the highest standards of quality.
When it comes to quality, we are making progress. In 2014, under the leadership of EVP Nakamura-san, our quality drive will become more comprehensive. Our goal is to be at the top level of the industry - and to leverage our quality improvements to elevate the overall opinion of our brands and products.
To accelerate our quality and cost reduction efforts, we are conducting company-wide reviews of both quality and cost-control activities - and bringing these teams together at every stage of production. This will allow us to achieve greater efficiencies and maximize the impact of quality-enhancement and cost-control efforts in our manufacturing operations.
For instance, even though our monozukuri teams met their cost reduction goals last year - we faced rising expenses in other areas. Some of these increases - such as foreign exchange rates and regulatory costs - are beyond our control. But we can avoid - and we are implementing systems to prevent - controllable costs, such as plant inefficiencies, warranty costs, or unnecessary feature enhancements.
As part of this effort, we are expanding the scope of our cost reduction activities beyond our monozukuri operations. From product planning to marketing, every team and region will set and meet cost reduction goals. And progress will be closely tracked under the leadership of Saikawa-san.
Our focus on efficiency has inspired the recent steps we have taken to maximize the power of the 15-year Alliance between Nissan and Renault. During 2013, sales from Nissan and Renault's seven Alliance brands reached 8.3 million units, making the Alliance the world's fourth largest automotive group by volume.
At the previous pace of Alliance synergies, we were on track to reach 3.3 billion euros in synergies by 2016. That may sound like a lot. But the fact is: to close the competitive gap with the industry's top-three car manufacturers - we must do more to maximize efficiencies.
That's why, at the start of fiscal year 2014, we converged four key business areas: Purchasing; Manufacturing and Logistics; Engineering; and Human Resources.
Already, this is driving deeper integration between Nissan and Renault. However, everything that makes these two companies distinctive will remain separate. Nissan's brands and marketing tactics, our product designs, and our culture will remain uniquely Nissan.
With the convergence initiative in place, our commitment is to achieve a minimum of 4.3 billion euros in synergies by 2016 - with a target of 5.3 billion euros in synergies. This represents substantial savings that will boost the profitability of both companies.
Our many efforts to strengthen Nissan's financial health not only fuel our ability to deliver cutting-edge vehicles, they also enable Nissan to maintain our commitment to corporate citizenship.
At Nissan, we take our responsibility to help build a sustainable society as seriously as our obligation to deliver for our shareholders. Our philanthropic efforts are focused on environmental, educational and humanitarian activities. Our goal is to help create a safer and cleaner world - where people have the resources, knowledge, training, and tools to improve their lives and their communities.
As you entered the auditorium, you may have noticed a display celebrating the 30th anniversary of one of our longest-running philanthropic projects -The Nissan Children's Story Book and Picture Book Grand Prix. Over the last three decades, Nissan has published and donated more than 200,000 books to help educate Japanese children across the country and in regional markets around the world.
And we continue to assist communities in need of disaster relief support in East Japan. Although Nissan's philanthropic activities are visible across the country, they also go far beyond Japan.
For example, in India, Nissan is taking an active role to help improve road safety and, specifically, increase seat belt use. As part of this effort, we launched the Nissan Safety Driving Forum; and we have expanded this initiative to 5 cities across India. Our commitment to moving our industry toward a zero-fatality future will continue in India - and beyond.
Another example: our ongoing global partnership with Habitat for Humanity. Through this partnership, Nissan continues to help to build sustainable communities in Japan, Australia, India, Indonesia, Philippines, Thailand, the U.S., and Vietnam. Last year, we expanded these efforts to Myanmar.
For more information on our broad range of philanthropic efforts, you can view our full Sustainability Report for 2014, which was published on Nissan's website yesterday.
Before we open the meeting to questions, I would like to emphasize that Nissan has begun this new fiscal year in a position of strength. We are committed to achieving our Power 88 goals. And we will continue to deliver for our customers and our shareholders.
Thank you, once again, for your support of Nissan Motor Corporation. That concludes our business report on 2013 and outlook for 2014.