Nissan Motor Co. Ltd. Investor Relations Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning, afternoon and evening to everyone and thank you for standing by. Welcome to today's Nissan 180 update and first half FY03 preliminary financial results teleconference call. For the duration of the presentation all participants will be able to listen only. A question and answer session will follow the main presentation and you may register your wish to ask a question by slowly pressing star 1 on your touch tone telephone. Please be advised this call is being recorded at the request of the host company for replay purposes and if you have any objections you may disconnect at this time. Now I would like to hand the line over to Mr. Gerry Stan (ph) and I will be standing by for the Q&A session. Sir, please go ahead.

GERRY STAN, INVESTOR RELATIONS, NISSAN MOTOR COMPANY: Thank you very much and good morning, good afternoon to everyone. Good evening to those of you in Asia. Thank you for joining our half year update and financial results conference call. We have tonight Monsieur Alain-Pierre Raynaud (ph), Senior Vice President and Global Controller for Nissan Motor Company; Mr. Haruhika Santo (ph), Vice President and Global Treasurer. We announced our preliminary results. I just would like to preface that these are preliminary results. I believe most of you are familiar with our process and they are subject to minor revisions. We will make an official filing on November 6 here in Tokyo and will follow up with additional communication. I would like to stress at this point that this will be primarily a question and answer session. We view this as a good follow-up to the presentation given by our CEO, Carlos Ghosn, earlier this afternoon here in Tokyo. So I invite you again once to press star 1 immediately to begin queuing up with questions. I know we did not have a chance to get to all questions during this afternoon's session so I'm sure we will have some right off the back. At this point I would like to turn it over to Mr. Raynaud just to give a quick, very brief recap of what we did release this afternoon. Thank you very much.

ALAIN-PIERRE RAYNAUD, SENIOR VP AND GLOBAL CONTROLLER, NISSAN MOTOR COMPANY: Good evening to everybody. I would like to first to [emphasize] as already explained, I am reporting to you preliminary figures [indiscernible] one where we reported on November 6. I would like to introduce our conversation by a similar review on revenue, operating profit and the present margin. The operating revenue in fiscal year 03 first half was 3,285.5 billion yen. We increased by 8.2% to reach 3,556.2 billion yen. In terms of operational profit, we start from 348.3 billion yen in fiscal year 02 first half to reach 401.1 at the end of the fiscal year 03 first half, i.e., an increase by 15.2%. The operating margin consequently achieved 11.3% versus 10.6% during our fiscal year 03 first half. In terms of double sales volume we reached 1.467 million vehicles, an increase by 5.9% for fiscal year 03 first half, where we achieved a volume of 1.386 million. If we try to understand the breakdown by region of our retail sales, we observed that Japan increased, slight increase from 383,000 units to 387,000 units. The biggest growth is from the United States, coming from 378 up to 420. In Europe we increased by 20,000 vehicles, coming from 251 up to 267 and in GOM we increased by 5.3%, coming from 374 to 393. So, generally speaking, despite a very difficult situation on TIV (ph) market in Japan we saw a very different situation in Europe. We think we will continue our increase in the [indiscernible].

If we try to estimate (ph) our operating profit structure, I would remind you that we achieved 401 billion yen, i.e., above 11% starting from [Audio Difficulty] [283] billion yen in fiscal year 02 first half. The main items explaining this growth are the following. In terms of foreign exchange in parts we consider that this impact is nil. It means that, in fact, the negative impact coming from a variation of yen versus dollar and has been fully compensated by positive impact coming from variation on Euro versus yen or Australian dollar versus yen. After that we have some mechanical impact related to this accounting. As you know, we decided that year to integrate all our [indiscernible] in our Balance Sheet and P&L which means we have a mechanical positive impact of 9 billion yen coming from this operation. We started change this [indiscernible] top of our consolidation considering that around more than 10 companies, we have very small impact on our P&L, and has to be considered through our equity [consolidation] method. It means we have an impact on our margin by minus 1 billion yen. The most important impact explaining the growth from 2002 to fiscal year 03 is the volume and mix impact. It contributed to our costs by 61 billion yen. The sales [indiscernible] company particularly contribute by 8.4 billion yen. The manufacturing cost reductions are of no impact, no specific impact, on the growth of our costs for particularly two reasons. We continue our progress in terms of efficiency but cutting costs of pension plan compensates this progress. Nevertheless, we continue our in progress in pushing cost reduction. We have positive impact by 92.3 billion yen. In terms of product enrichment we have an negative impact of minus 37.5 billion yen, [indiscernible] which was not planned within our budget. Same case for R&D expenses which are a negative impact of minus 30 billion yen.

G&A and others have a negative impact by [7.9], let us say, respecting the rule of having growth limited to 50% of our sales growth. …