Nissan Motor Co Ltd Earnings - Q4 2024 Analysis
Positives
- Sales in other markets are forecasted to increase by 6.6% due to expected growth, for example, in Brazil and India.
- The company saw a positive impact from foreign exchange of ¥36 billion against the ¥569 billion operating profit in fiscal 2023.
- North American sales rose 3% driven by new model launches, offsetting declines in other regions.
- The company plans to achieve positive operating profit and positive FCF by fiscal year FY 2026.
Q&A Highlights - Q4 2024
Analyst asked about the company's plan to address Japanese operational reform and why it is being done now.
The company is considering right-sizing of vehicle assembly plants and powertrain plants globally, including Japan. They have already announced consolidation of Argentina's pickup manufacturing to Mexico and Thailand's consolidation line plant one to plant two. They have a clear plan in place and will take care of the affected employees.
Analyst asked about the company's plan and approach to address the employment of those affected by the disclosure.
The company has identified a candidate plant for rightsizing and has a clear plan in place. They will take good care of their employees and manage the communication accordingly, supporting them in the transition.
Analyst asked about the global sales and operating profit margin of Nissan Motor Co Ltd, and how the company plans to achieve positive outer (00:40:15) OP and positive free cash flow in FY 2027.
Ivan Espinosa, the company's executive vice president, explained that the company is taking a prudent approach to revenue, aiming to keep it flat, while attacking fixed and variable costs. He also mentioned that the company has a capacity of 2.5 million units, with an upper flexibility of 0.5 million, and OEM in programs with partners that account for 400,000 cars. The company's goal is to achieve positive outer (00:40:15) OP and positive free cash flow in FY 2026, and beyond that in FY 2027.
Analyst asked about the proportion of China-made vehicles that Nissan Motor Co Ltd plans to export and to which markets they plan to export them.
Ivan Espinosa, the company's executive vice president, explained that the company wants to accelerate the exports of the vehicles that they are preparing in China, but did not give a specific number. He mentioned that the Nissan N7 and Frontier Pro PHEV models have been welcomed greatly with great expectation and support not only in China but also overseas, and these are two of the first models that they will accelerate to export.
Analyst asked about the company's plans for deepening collaboration with Honda and the possibility of partnerships with Hon Hai in Taiwan.
Ivan Espinosa, the company's Chief Operating Officer, answered that they are continuing to work with Honda, particularly in the areas of vehicle intelligence and electrification, and that they are actively exploring opportunities in the US market, including potential partnerships with Honda. He also mentioned that they are open to collaborating with multiple partners as long as corporate value is coming.
Analyst asked about the company's restructuring plans, specifically the increase in the number of headcount reductions and the closure of additional plants.
Ivan Espinosa, the company's Chief Operating Officer, answered that they are confident in the plan they are laying down and that they will focus on executing it. He explained that the 20,000 workforce reduction includes manufacturing direct and indirect, as well as SG&A and R&D resources, and that they are not solely coming from the manufacturing side. He emphasized that the company needs to focus on doing rather than considering more and more scenarios, and that they will focus on executing the plan.
Analyst asked about the 20,000 reduction in headcount, including in Japan.
Ivan Espinosa confirmed that the reduction includes Japan, and it is due to a global measure that the company had to take to survive. The company had invested heavily in manufacturing capacity and human resources in the past, but now they are facing the reality of being much smaller than expected, and they need to take action to ensure the survival of Nissan.
Analyst asked about the positioning of production entities in Japan and the models that the company needs to build.
Ivan Espinosa stated that Japan will remain one of the core manufacturing footprints for the company, but they are taking a strategic view to ensure flexibility and competitiveness improvement. They will be extracting the best of their manufacturing footprint and driving competitiveness improvement.
Analyst asked about the company's plans for mitigation measures and how they will impact the tariffs.
Ivan Espinosa, Nissan's CFO, explained that the company is considering various measures to address the tariff situation, including focusing on retail sales and leveraging operations in North American plants. He also mentioned that the company is working closely with suppliers to develop mitigation plans. Jérémie Papin, Nissan's Chief Financial Officer, added that the company expects to mitigate 30% of its exposure in Q1, and that they are providing a good Q1 outlook based on their plans and forecasts.
Analyst asked about the company's plan to address the question of board members at the AGM next month.
Ivan Espinosa, Nissan's CFO, stated that he is not in a position to answer on behalf of the board, but that the company's Chairman of the board has made some statements on the matter. He suggested that the comms team share these statements with the analyst and that the analyst can always ask the board members for their position on the matter.
