Nissan has delivered a year of growth despite numerous challenges in fiscal year 2013. Operating profit and net income exceeded both our mid-year guidance and the comparable year-ago figures. The company also generated significant automotive free cash flow and further strengthened its balance sheet.
For the 12 months ending March 31st, 2014, Nissan is reporting pro-forma consolidated net revenues of 11.43 trillion yen and operating profit of 605.7 billion yen, which equates to an operating margin of 5.3%. Net income was 389 billion yen, representing a net margin of 3.4%. Automotive free cash flow was a positive 208.1 billion yen and Nissan ended the period in positive net cash position of 1.13 trillion yen for its automotive operations.
This is a satisfactory outcome, reflecting solid growth in several key markets. But these results, which mark the halfway stage in our Power 88 mid-term business plan, do not yet reflect Nissan's actual potential.
As Nissan embarks on the second-half of the Power 88 plan, we remain committed to the strategies and goals we have outlined, and we will focus relentlessly on enhancing product effectiveness and quality; optimizing our manufacturing capacity utilization; continuing to pioneer new technologies and improving our profit margin.
Before highlighting some of the steps we are taking, I will review our overall sales performance for fiscal year 2013 and then break this down by region.
FY13 sales performance
For Fiscal Year 2013, ending March 31st, overall global industry volumes reached 83.1 million units, an increase of 4.8%. Nissan out-performed the industry with sales up 5.6% at 5.19 million units. This equates to a global market share of 6.2%.
Moving now to our key markets:
In 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, representing a market share of 12.6%. This improvement was driven by strong sales of our DAYZ series; as well as strong demand for our first CMF model 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.
In China, where our sales performance is measured on a 12-month calendar year, Nissan out-performed overall market growth. The total industry in China was up 14.0% 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, demand has since improved. 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. The total industry in the U.S. was up 6.4% at 15.65 million units, while Nissan sales volume increased by 13% to 1.29 million units amid strong demand for the new Rogue and the Altima.
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 Canada, the new Rogue added to the sales momentum.
In Mexico, Nissan has 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's 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, Oceania, and Latin America were affected by adverse exchange rate movements, policy changes and fiscal measures.
Our sales in other markets declined by 8.5% to 879,000 units. In Asia and Oceania sales declined 17.8%, to 363,000 units. Latin America fell 16.1% to 186,000 units. These reductions were partly offset by a 22.5% increase in the Middle East to 226,000 units.
Nevertheless, Nissan enjoyed the first signs of success in other emerging markets. In India, we began selling the all-new Datsun GO, and consumers are reacting positively to the new Terrano.
In summary, our global sales performance has been positive despite volatile conditions in specific emerging markets.
I will now turn to our consolidated financial performance.
FY13 Consolidated financial performance
As we have done for several quarters now, Nissan is presenting its financial performance on both a management pro forma basis which includes the proportional consolidation of the results of our joint venture in China as well as the official basis which utilizes the equity accounting method for our joint venture in China.
On a management pro forma basis:
Consolidated net revenues increased by 1.8 trillion yen 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 totaled 605.7 billion yen, yielding a 5.3% operating margin.
For the fourth quarter, consolidated operating profit totaled 234.9 billion yen, up 35% compared with the same three-month period of the prior fiscal year.
For the full year, net income was 389 billion yen, up 13.6% on the same period of fiscal 2012.
Looking at the full-year operating profit movements in detail:
- The 247.6 billion yen foreign exchange impact reflects mainly the correction of the yen against the U.S. dollar.
- Purchasing cost reduction efforts, including raw materials, resulted in savings of 202.6 billion yen.
- Volume and mix produced a positive impact of 70.4 billion yen.
- The increase in selling expenses, including product enrichment costs, resulted in a 266.5 billion yen negative movement.
- R&D expenses increased by 24.2 billion yen.
- Manufacturing expenses increased by 36.8 billion yen,
- Warranty and recall expenses increased by 72.1 billion yen, and
- Other items including remarketing had a negative impact of 38.8 billion yen.
At the end of the period, our balance sheet is stronger with an automotive net cash position of 1.13 trillion yen, compared with 915.9 billion yen at the end of March 2013.
Now switching to our summary results under the equity accounting method for our China joint venture, revenues for the 12-month period rose 20 percent 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.
While the latest financial results are solid, we are taking firm steps to deliver more rapid progress, and I will now explain some of the action under way to achieve our mid-term objectives
Nissan is embarking on the second half of its Power 88 mid-term plan from a position of relative strength in brand and sales power. In 2013, we ranked 65th among all global brands in the Interbrand survey, the highest position ever achieved by Nissan.
This ranking reflects efforts to reinvigorate our brand strategy from Nissan in the mass-volume segment; to Infiniti in the premium market-place; and Datsun and Venucia serving entry-level segments in emerging markets and China, respectively.
Nissan's brand strength and sales power demands relentless market focus, which is why we have strengthened our geographic sales organization. Last November, we made several regional and operational management changes. We have moved from three regions- to a six-region structure to improve market performance and respond rapidly to changing market conditions.
Three additional strategic priorities will drive future performance in the remaining three years of the Nissan Power 88.
First, we will maintain our commitment to deliver new technologies and lower emissions. Nissan remains committed to zero-emission leadership, symbolized by the Nissan LEAF, a model that commands almost 50% share of the global EV market. Our EV technologies have attracted more than 110,000 Nissan LEAF customers worldwide. And they are also in use in EV taxi fleets and the new e-NV200 van, which is undergoing fleet trials with major companies.
Second, we will 'sweat our assets' in terms of manufacturing capacity. We are past the peak of capital expenditure - as a percentage of revenue - when it comes to new plant investment. New capacity is coming online this year. We recently opened production which will enable Nissan to seize growth opportunities going forward.
Third, our Alliance partnership is moving to a new stage. Collectively, the Alliance brands sold 8.3 million units in 2013, making it the world's fourth largest automotive group. We are accelerating purchasing synergies and driving deeper integration within the Alliance. Co-operation with Alliance partners and savings from the Common Module Family development (or CMF) program promises additional benefits in the years ahead.
Our continued Alliance activities coincide with a strong product launch schedule that will see flagship models come to market in 2014 from Nissan, Infiniti, Datsun and Venucia as we serve a wide-range of customer segments.
Specifically, we will launch 10 new vehicles over the coming 12 months. These include the new Murano in the U.S. ... a number of all-new Datsun vehicles in India, Russia and Indonesia ... and the new zero-emissions e-NV200 in Japan and Europe. The ongoing product offensive will also feature an all-new global pick-up truck and the long-wheel-base variants of the Infiniti Q50 and QX50 in China.
I will now outline our forecast for the current fiscal year.
For fiscal year 2014, Nissan anticipates total industry volumes will rise by 1.6% to 84.42 million units. In that period, 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%.
In Japan, we expect continued pressure on consumers due to the recent sales tax increase. This will be more than offset by sales growth in China, North America and in Europe. We also forecast improvement in other markets, which were depressed through all of the 2013 fiscal year.
Using the equity accounting method for our China joint venture, we anticipate net revenues growing by 2.9% to 10.79 trillion yen for the 12 months ending March 31, 2015. Operating profit is forecast to reach 535 billion yen - representing a margin of 5%. Net income is expected to reach 405 billion yen, an increase of 4.1% over the comparable period a year ago.
Looking at the year-over-year change in operating profit, we anticipate:
- A negative foreign exchange movement of 55 billion yen;
- An improvement in sales and marketing of 25 billion yen;
- A 85 billion yen improvement in monozukuri;
- And an increase in G&A and other costs of 18.4 billion yen.
On a pro forma basis, we are anticipating net revenues will rise by 4.5% to 11.95 trillion yen for the 12 months ending March 31, 2015. Operating profit is forecast to reach 680 billion yen and net income is predicted to be 405 billion yen.
Based on our outlook and our expectations for continued solid 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.
Before we open the discussion to questions, I would like to emphasize that Nissan is well-placed to deliver on its strategic objectives during the second half of the Power 88 plan. For the 2013 fiscal year, we have reported solid earnings, with a strong performance in the fourth quarter.
Nissan has the potential - as well as the resources, the manufacturing capacity, and the management organization - to significantly improve our operations and competitive standing. This means pursuing profitable growth opportunities, focusing relentlessly on quality, and enhancing our sales power.
# # #