COO Shiga on H1 Numbers and Beyond

YOKOHAMA, Japan - Nissan released its results for the first half of the financial year on Tuesday, and the Global Media Center's Shotaro Ogawa spoke with Chief Operating Officer Toshiyuki Shiga on the numbers and the outlook ahead.

Despite issues such as the strong yen, European economic woes, and China-Japan political strife, the COO called the number relatively good, although Nissan lowered its full-year forecast.

Nissan released its second quarter earnings. What were the key results of the half-year figures and how does this position Nissan?

Chief Operating Officer Toshiyuki Shiga: Nissan has been growing significantly over the last few years. In the first half of fiscal 2012, we have attained a double-digit growth in global sales with 2,476,000 cars sold.

That was up 11.3% from the same period last year. Amid a strong yen that's weighing on our revenues, we were still able to report a 4.1% increase in revenues with first-half sales rising to 4.5468 trillion yen. Unfortunately, our operating profit slightly went down to 287 billion yen, but we still maintained an operating profit margin of 6.3%.

Nissan is growing globally in emerging countries. Also in America and Europe, where the economy is facing tough situations, we are growing.

It's hard to say where we are ranked until we see an annual earnings report. But despite this changing environment and the yen staying strong, I believe we were able to report relatively good numbers.

Headwinds such as Europe, China and the yen remain. What has been the impact and how do you see the outlook ahead?

COO Shiga: We had to lower our forecast for this fiscal year, which we announced in May this year, to 125 billion yen, unfortunately. At first, we had assumed the exchange rate of 82 yen to the dollar. Actually, now it's about 80 yen. We've revised assumptions and now our assumed exchange rate is 80 yen for the second half, and 79.70 yen for the fiscal year, crossing the 80-yen level.

Currencies of emerging countries are also weakening against the dollar. Such currencies as the Russian ruble and the Brazilian real are weighing on us. Meanwhile, Nissan's fiscal year starts in April and ends in March.

As far as our operation in China is concerned, the fiscal year starts in January and ends in December. So our earnings report out of China for a period from January to June are incorporated into the entire company's April-September earnings. In other words, all the impact from anti-Japanese rallies in China that started in September will be in our second-half earnings.

We had a 6.3% increase in profit in the first half, but an on-going fall in sales in China will directly influence our financial report for the second half. We factored that in, and lowered our forecast by 125 billion yen to a new full-year profit outlook of 575 billion yen.

For one, we have a strong yen. Then, we have a situation in China. We are trying to do all we can about it, but this China factor is political and we cannot really predict. For that reason, we've assumed a relatively bigger risk margin. Moreover, we have a deteriorating European economy. These three external factors are beyond our control. As much as we wished to stick with our initial forecast, taking all these factors into account, we have lowered our forecast for the second half.

Nissan remains on track to achieve its Power 88 goals. What are the areas to watch in the second half of this year?

COO Shiga: We are expanding various projects as part of Nissan Power 88. Recently, we announced a new factory in Thailand. About 25% of Nissan's business relies on China.

We hope to expand in emerging countries other than China, such as in ASEAN, India, Brazil and Russia, to achieve a balanced growth. Meanwhile, the yen continues to stay strong and cost-cutting competition is getting fierce among car makers. It's going to be important for us to increase cost-competitiveness and stick to that goal.

Another big pillar of Nissan Power 88 is enhancing the power of our brand. While we try to be cost-effective, we will raise our brand power at the same time, which will help Nissan increase profit and gain consumer confidence. That's very important.

In a way, the success of Nissan Power 88 hinges on raising our brand power, and that's where we will focus our effort.

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