Ladies and gentlemen, thank you for joining the session today. We would like to begin the announcement of Nissan's first quarter financial results for the fiscal year 2020. In consideration of the COVID-nineteen pandemic, this will be a virtual conference. The presenters on the stage, in order to make sure they are well heard, they are not wearing the mask. But with regards to other organizers, we are taking steps to prevent the spread of the infections.
Thank you for your kind understanding. Let me introduce you to the people who are here with us today. Representing Executive Officer, CEO, Mr. Makoto Uchida representing Executive Officer, COO, Mr. Ashuwani Gupta and Executive Officer, CFO, Mr.
Steven Ma. Now I would like to ask CEO, Ujida san, to start. Mr. Ujida, the floor is yours. Yes.
Good afternoon. Thank you for joining us for the announcement of Nissan's first quarter earnings for fiscal year twenty twenty. For the first quarter, total industry volume was halved as a result of the worldwide outbreak of the novel coronavirus. Consequently, Nissan saw a significant decline in sales. In addition, we suspended production at many plants globally due to the COVID-nineteen pandemic.
The plants that resumed operations also suffered from low utilization rates due to declining sales. As a result, the company's performance has been impacted by this challenging business climate. Today, the global sales performance and financial results for the first three months of fiscal year twenty twenty will be outlined by Mr. Ashwani Gupta, who is the COO. Then I will discuss the outlook for the full fiscal year as well as the Nissan NEXT transformation plan.
Following the presentation, we'll be happy to take any questions you may have. I will now ask Gupta san to explain.
Thank you, Chita san. Hello, all. Thank you for joining us today. Let me start today's presentation with global total industry volume and the related Nissan sales results for the first quarter. These results also reflect a full quarter of COVID-nineteen disruption that we knew would undermine our performance in key markets.
When we look at global total industry volume on a financial period basis which includes China from January to March 2020, we see a drop of 44.5% to 12,490,000 cars. Correspondingly, Nissan Global sales totaled 643,000 vehicles which were 47.7% less than a year earlier. When we look at the sales period and correspondingly China's realistic sales situation from April to June 2020, Nissan kept a market share of 5.4% with 827,000 units sales globally excluding U. S. Rentals.
This was despite inconsistencies in sales mix across the world due to lockdowns and or slowdowns caused by COVID-nineteen. Amidst the pandemic, Nissan's top priority was to protect our employees. To put our status in perspective, let me explain the impact on three key areas: number one, production number two, operational status of sales outlets and number three, the start of production of our new models. This is the production status for the first quarter. In Japan, slow market demand as well as the significant decline in exports has affected production volumes significantly which remained below the year earlier.
Even in June, we saw production volume 61% lower than a year earlier. In China, Nissan's production volume for the January to March period decreased 51% from a year earlier. However, we saw a steep recovery in the April to June period with 8% higher volume than a year earlier. In North America, plants are gradually restarting but are still at 60% in June. Europe is at 20% compared with a year earlier.
We are taking extra precautions in restarting the plants keeping people's safety as top priority. This resulted in low utilization of our plants globally. Next, let's look at the impact on operations of sales outlets. In Japan, although all outlets stayed open, there was a significant drop of up to 60% in customer traffic. Even in China, we see a similar trend where all dealerships remained open.
However, there was a substantial decline in the customer traffic. Though the dealerships in North America and Europe are gradually ramping up, showroom visits continue to remain very low. However, during the COVID-nineteen period, we have taken additional initiatives to strengthen our online sales platform and 11% of our sales went through a digital journey. We launched specific digital sales initiatives like shop at home, ensuring smoother customer experience. While we had to shut or slow down production, we continued sales through open showrooms as well as online.
This did help to reduce our inventory and will help us drive quality of sales moving forward. Coming to the start of production of new models, I truly appreciate our employees in Japan as well as overseas who ensured timely start of production of new models even if they worked from home. Thanks to them, we were on schedule with new models and kept our sales momentum. For example, we were able to start production of in February, Sentra in Mexico, in March, Kix ePower for export from Thailand to Japan and other Asian countries and in June, the new rope produced in Japan and exported to The United States. As you can see, the pandemic had a severe impact on our operations but despite this, Nissan ensured business continuity while taking care of people.
Let's now look at our sales performance in three core markets. In Japan, our market share rose steadily from less than 8% to more than 11% in the April to June period. In June, the market share grew from a year earlier due mainly to our K car sales. Nissan increased its share of the K car segment following the introduction of the new Nissan RUX in March. Our market share in the registered segment is also growing In particular, Nissan Kicks compact SUV launched at the June has been very well received.
It has more than 10,000 orders in one month. We expect to increase our market share in the registered car market. Our sales in China have steadily recovered, progressively increasing our market share. In particular, we increased sales in April to June period by 4% from year earlier. This momentum was driven by strong demand for the Silphi and the Ultima.
In The United States where we are transforming our business by focusing on profitable retail operations, we significantly increased our retail share from 4.9% to 5.4%. Nissan fleet sales in the first quarter decreased to one fifth of the year earlier level. As a consequence, net revenue per unit is increased approximately by $700 In addition, four Nissan models have won top segment honors in the recent JD Power Appeal Study, a gratifying recognition by our customers. While the impact of COVID-nineteen remains challenging in The United States, we see a steady recovery and contribution from The United States in our quarterly financial results. This improvement was specifically led by Nucentra, NuVersa and Titan.
Now moving to our financial results. Given the decline in the global market and sales volume, consolidated net revenue for the first three months of the quarter fell 50.5% from a year earlier to 1,170,000,000,000.00 yen The operating loss was 153,900,000,000.0 yen and the net loss was 285,600,000,000.0 yen The non operating loss includes a 84,700,000,000.0 yen loss by the companies under the equity method. The extraordinary loss of 72,300,000,000.0 yen reflects a 33,200,000,000.0 yen one time net loss due to shutdowns and other items caused by COVID-nineteen and restructuring charges of 40,100,000,000.0 yen Free cash flow for the Automotive segment for the quarter was negative 815,700,000,000 reflecting impacts from the profit decline due to COVID-nineteen and low utilization of plants. This slide illustrates the profit variance. Foreign exchange fluctuation had a positive impact of JPY3.5 billion.
Volume and mix, after sale parts and profit deterioration of consolidated dealers had a negative impact of JPY232.2 billion. Selling expenses had a positive impact of JPY35.9 billion while Monozukuri fixed cost and other impact of JPY37.5 billion yen primarily due to reductions in fixed manufacturing costs and general and administrative expenses. Partially, it offset the deterioration in the manufacturing variable cost resulting from the low utilization of plants. The key takeaway is without fixed cost and actions to reduce the selling expenses, our results would have been worse. This underlines that Nissan NEXT has a demonstrable result and is laying the foundation for sustainable growth.
This remains the right plan at the right time to address our challenges. Finally, the liquidity status for the first quarter. Nissan ended the period with negative free cash flow resulting in an automotive net cash position of JPY235.2 billion. Despite the decrease in net cash, Nissan maintains more than JPY1.2 trillion of auto cash. In June and July, we secured an additional 182,400,000,000.0 yen in funds in response to COVID-nineteen.
We also issued 70,000,000,000 yen in corporate bonds. Furthermore, we have unused committed credit lines of approximately 1,900,000,000,000.0 yen as of June. The company continues to monitor the pandemic closely and is preparing accordingly. Let me once again stress on our key priorities moving forward. We will continue fixed cost reductions.
We will grow profitable market share through quality of sales of new products. We will keep focus on operating cash and collection of adequate funds to maintain our liquidity level. As management, we are well aware of the scale of the challenge and that market conditions will remain volatile in fiscal twenty twenty. We remain confident of our long term prospects for return to sustainable profitable growth. This concludes my presentation.
Now I will turn over to Uchida san.
Thank you, Yash.
Now let me explain the fiscal year twenty twenty full year forecast. Given the impact of the COVID-nineteen pandemic, we anticipate all markets to decrease in fiscal year twenty twenty. We are forecasting global TIV to be 72,040,000 units, a decrease of 16% from the prior year. Total demand in Japan and China are expected to decrease by 7% to 8%, while demand in Europe, The U. S.
And other markets is expected to drop by approximately 20%. The market outlook remains uncertain, and the demand may see further deterioration due to a possible second wave of the pandemic. We will keep a close watch on the market. Against such backdrop, for the full fiscal year, Nissan's global retail volume is expected to be 4,125,000 units, a decline of 16.3%. We expect to outperform the markets in Japan and China while underperforming in the rest of the markets.
In The United States, we are moving away from pursuing excessive volume to reassessing our fleet ratio, optimizing incentives in order to improve the quality of sales. Global market share is expected to be 5.73%, almost in line with the prior year. This is the financial outlook for fiscal year twenty twenty. We are forecasting the net revenue of 7,800,000,000,000.0 yen down 21%, which reflects a 21.7% decrease in sales volume excluding China and an operating loss of $470,000,000,000 yen We also forecast a net loss of $670,000,000,000 yen for the fiscal year as we expect losses in companies under the equity method and additional restructuring charges that we did not book last year. Fiscal year twenty twenty will be a challenging year in terms of profitability and free cash flow as we are still on the road to recovery with our new transformation plan, not to mention the significant negative impact of the COVID-nineteen pandemic.
Therefore, we plan to suspend payment of the dividend for this fiscal year. Our entire team is committed to the implementation and execution of our transformation plan in order to recover profitability and to return to a stable and sustainable dividend as soon as possible. This slide provides the operating profit variance analysis for the fiscal year forecast. Foreign exchange fluctuations mainly from the yen dollar rate are expected to have a negative impact of 40,000,000,000 yen The volume impact, including volume and mix of new vehicles resulting from lower TIV due to the COVID-nineteen outbreak, part sales and deterioration in profit of consolidated dealers is expected to have a negative impact of $425,000,000,000 yen The decrease in profit from the sales finance business, including provisioning for net credit losses and costs associated with residual value losses for leased vehicles primarily in The U. S.
Is forecast to have a negative impact of 85,000,000,000 yen The negative impacts from the efficiency of variable manufacturing costs due to the decline in production volume and resulting lower utilization rates and an increase in product enrichment costs are offset by the positive contribution from fixed costs and purchasing cost reduction efforts. The net impact of manufacturing related fixed costs and others is expected to be a positive 120,500,000,000.0 yen As we stated in May, we are on track to reduce fixed costs by 300,000,000,000 yen versus the fiscal year 2018. For this fiscal year, we expect to reduce fixed costs by more than 150,000,000,000 yen year on year, including depreciation, marketing and general and administrative expenses. Finally, I want to reiterate our business transformation plan, Nissan NEXT. As explained before, our aim is to bring Nissan back on the growth track in four years and to build a business foundation by the end of fiscal year twenty twenty three that is sustainable and robust enough to compete effectively for the next decade.
To realize this, we will ensure steady profitable growth without pursuing excessive sales expansion concentrate on core competencies while enhancing the quality of our business and financial discipline and restore a culture defined by Nissan Nest for the new era. These are the three keys. Nissan is on track to reduce fixed cost by 300,000,000,000 yen against fiscal year twenty eighteen by the end of this fiscal year as we rationalize our business. We are also streamlining production capacity to 5,400,000 units and developing a more efficient and competitive global product lineup. Through prioritization and focus, we are allocating resources consistently to core markets, core products and core technologies in order to realize a solid recovery and sustainable growth.
Essential to support these reforms will be an emphasis on quality and customer needs and cooperation with our suppliers and dealers. Nissan is also on track to launch at least 12 new models in the next eighteen months as we rejuvenate our product portfolio. In The United States, we continue to improve quality of sales and brand value with renewed product offerings, starting with the new Rogue, Nissan's top selling model, which will be followed by Pathfinder, the Frontier and two new Infinity models. In Japan, we have launched the new Kicks dedicated to e power. We are widening the application of e power to increase our electrification rate to nearly 60% in Japan and to accelerate our momentum.
This includes the new Nissan area. Nissan is also updating and enhancing its lineup in the C, D, EV sports car segment where our strength lies. The Nissan ARIA, which we unveiled earlier this month, represents a new chapter of Nissan and brings forth a new face with our new brand logo. This new crossover EV, the pinnacle of our strength, has attracted more than 20,000 hand raisers around the world as of today. Aria will play a key role as a brand driver and an EV front runner in this new era.
Nissan faces considerable challenges this fiscal year. The company's performance is impacted by the tough business climate and our business transformation initiatives. Even amid this difficult phase, by fully executing Nissan NEXT, I am sure that Nissan will achieve a 5% operating margin on a pro form a basis and a 6% global market share by the end of the fiscal year 2023, which will set us our milestones with the plan. As I've repeatedly mentioned, Nissan has much more potential to deliver. I am determined to carry out this plan without any compromise to put the company back on the growth trajectory and revive Nissan once again.
Thank you. Thank you very much, Mr. Uchida. Now we'd like to entertain questions. In order to entertain as many questions as possible, please limit the number of questions to one question per person.
When you are over with your question, please put your microphone on mute. Thank you for your understanding. Now NHK Owe it's yours, Owe san of NHK. Yes. Hello.
Thank you for this opportunity. With regards to the company's results, COVID-nineteen is largely impacting the core or key markets. How do you perceive the economy of these key markets? And this deficit that you are forecasting for the full year, is this within your initial assumption? Thank you for your questions, says Mr.
Ujida. In the May, when we announced the Nissan NEXT, I said that in fiscal year twenty nineteen, the TIV will come down by 15% to 20%. Against such backdrop, fiscal year 'nineteen and 2020 sorry, it was about fiscal 2020. After we developed the forecast for full year 2020, we said that in fiscal year twenty twenty one, the COP will be more than 2% in 2021. So in that sense, this Q1 result in 2020 and the full year outlook is a challenging one.
However, this is within our expectation. Having said that, by region, if you look at the past two months, the business status in U. S. Or the environment is becoming tough in U. S.
In the last two months. So if we execute fully the Nissan NEXT by 2021, we can put Nissan back on the growth track. I'm certain about it. Without any compromise, I am strongly determined and work as one team to execute the business transformation plan, and this is an important factor. One another thing.
Depending on the regions, COVID-nineteen evolution is remaining uncertain. So in this sense, we need to keep a close watch on the markets. And by region, we will need to carry out the strategy based on the Nissan NEXT. We, the top management and entire company, is working on this. Now moving on to the next question.
Toyo Keizai, Kishimoto san. It's yours. Yes. Thank you for this opportunity. I am Toyo Keizai, Kishimoto.
My question is about Q2 and beyond. TIV will gradually recover after Q2. That's what the majority is saying. According to your full year outlook, I think you are foreseeing the same trend. But if you look at the operating profit in Q2 beyond, your speed of recovery or profitability is very slow or at least we don't see a bright signs or improvement of profitability after Q2.
Besides COVID-nineteen, is there some issues that are specific to Nissan? What are the problems behind this number? Thank you for your questions, Suzuki san. Yes, as I said, sales volume, excluding China, will come down by 22.5%. And on top of this, parts sales is deteriorating.
And consolidated dealers profitability is deteriorating. And I have shown in the variance analysis, sales finance business, we are provisioning more amount for the credit loss. And this is have a negative impact on profitability and low utilization ratio, which is generating inefficiency. And as a result, there is a big amount of losses in the fiscal year 2020 on the full year basis. So the question is, while we keep a close watch in COVID-nineteen evolution, without putting pressure on wholesale volume, we will continue controlling the inventories throughout the year.
That's our plan. And the business transformation plan, we said that we are reducing fixed costs. Against fiscal year 'eighteen, we are going to reduce by 300,000,000,000 yen and we have a plan to make it happen. Therefore, with this, in pursuit of Nissan NEXT, we are making sure we are bringing back Nissan on the growth rack with this year. And in terms of the demand, global demand, as you indicated, COVID-nineteen remains uncertain.
But at the latest in Q4 of this year, we assume that the TIV will slightly improve against the prior year. That's the assumption for this outlook. You very much. Moving on to next question. Jijitsu Shin, Eino please.
Jijitsu Shin, Eino speaking. Thank you for this opportunity. My question is as follows. In the Nissan NEXT, you are going to bring back profit margin to 2% or more. And in 2023, it should be over 5%.
But this fiscal year, the forecast and the results are challenging, and COVID-nineteen evolution remains uncertain. Are you sure you can reach 2% or more next year and reach 5% or more in 2023? Could you elaborate on this? What's the visibility of reaching these milestones? And what makes you think so?
Cost is controllable. In the Nissan NEXT, we are talking about fixed cost reduction of 300,000,000 yen This fixed cost reduction is underway. And in doing so, new cars for new models, we are going to introduce new models one after another. So we are trying to increase the revenue and profit of new models. This is the biggest key.
And in the full year outlook for 2020, in Nissan this is within our assumption when we announce Nissan NEXT. So in new models, we will increase revenue and profit. As long as we do this, we will certainly meet 2% of operating margin that we set forth as our milestones. Therefore, we used to pursue excessive sales expansion in the past. But while we keep a close watch on COVID-nineteen evolution, we need to keep control on wholesale.
Without pushing sales on the wholesale side, we need to ensure we need to boost the sales volume of new models. If we do these two, while we compensate for the cost by reducing fixed cost by fiscal year twenty twenty one, we can reach the milestone. Thank you. Moving on to the next question, Automotive News. Hans San, it's yours.
Hello. Hans here from Automotive News. Thank you for the opportunity to talk to you today. Can you give us a little bit of a background more on maybe some of the details, especially about The U. S.
Market, maybe about the development of retail share of the fleet sales, inventory and your development of this revenue per unit, especially how it compares with the incentives. It seems that makes I'm wondering if the incentive sales incentives are how they're impacting your development on these other issues. And can you also talk a little bit, not just about The U. S, but how your initiatives are taking effect in your other main markets, Japan and China?
Thank you for your question. What you have asked is very important point, and I would ask Ashuwani san to further explain what are the measures we are taking, first of all, for The U. S. And also related to your other question, the other market.
Thank you, Hans, for the question. Let me start from U. S. Because that's your first question. U.
S. Is a very important market for us, and this is a market where we have launched the business transformation. The business transformation is based on five key pillars. The first pillar is the product lineup renewal. We know that our average age of our products in U.
S. Is five point four years. With eight new models in next twenty eight months, we are going to renew the age to 3.3. We have started from Sentra. We will launch New Rogue, then Frontier, then New Pathfinder and so on.
That's more on the product technology product strategy. This product strategy is supported by our technical strategy, which is launching the latest advanced technologies like ProPILOT Assist and the safety features. The second part of the business transformation is more on the sales power, which is the dealer engagement and motivation. And we launched in February the comprehensive dealer engagement plan, which is based on the financial health of the dealers and a mid term business relationship. And this is ongoing in the right direction.
The third pillar is the brand power. For brand power, we are building up the foundation. We are now JD Power, Appeal, we are in four segments. In JD Power IQS, we are number one Japanese brand, second year consecutively. Then seven of our products are consumer recommended and we also got the top most score for the reputation.
What does it mean that the customers as well as the rating agencies have started trusting in our products and technologies. The number four is the fixed cost. We are aligning our capacities in Simrana and Canton to the fixed cost. And number fifth is the culture, which is we are shifting the culture from volume to value. And as a result, to answer to your question, we have seen the significant increase in our retail sales.
We have seen significant drop in our fleet sales. And as a consequence, we have more than $700 net revenue per unit increase in United States. And we do believe with these five pillars, as we move forward to launch New Rogue and further models, we will be in profitable growth in United States. The next you talked about the China. The China the business strategy is, of course, focused on China because in China, we have double digit market share and we are profitable.
But what we are seeing in China is shift from first time car buyers to the second time car buyers because the market is growing in a single digit and not double digit as it used to before. And that's where Nissan is coming up with the new technology in the products starting from ProPilot Assist followed by ePower, so that the customer expectation in China to have as a second time car buyer is explored. And this is where we are going to grow in China and we are targeting the double digit market share. And finally, the most important is Japan, our home market. We have a strength in Japan, number one, because our brand power is great.
The Nissan brand in Japan is recognized by a technology brand and that's the reason we see a great perception in terms of autonomous driving features like ProPilot. We see the electric, the e power penetration. We see the EVs and we see the connected. So we would like to capitalize on our brand power in Japan with a strong dealer engagement we have in Japan and we want to fill this with the new product lineup. In Japan in registered card, we did not launch any new car for last thirty four months and that's where we are struggling to get our registered market share.
But now with the new kicks and seven new models which will come in Japan, we are confident that we will capitalize our brand power, our sales power fueled by the new product. Average lineup will be reduced to less than four years in Japan. So this is all about U. S, China and Japan. We have business strategies, but focus on these three markets.
Thank you.
Thank you very much. Next, Yomi Rishimbu, Tsukuba san, please. Floor is yours. Tsukuba of Yomiuri Shimbun. Thank you very much.
I have a question to Mr. Uchida. COVID-nineteen impact, when is it going to be contained? Can you talk about it? Especially the recovery of TIV for every quarter, can you explain the progress anticipated progress of COVID-nineteen situation?
For your question. Very tough question, challenging question. As I explained earlier on, as of now, currently in the past two months, regionally situations are so different and future outlook is very opaque. So at least as for us, what is the level of our envisioning in drafting our plan? This year, first quarter, TIV, 44.5% reduction versus previous year.
So Q2, Q3 regions will show different performances, but gradually, there will be a recovery. And Q4, it will be a positive figure compared with the previous period previous year. But Q1 plummeting is so huge, 44.5%. So it will be annually 16% negative. But there will be a great regional variance.
So regarding particular region, we will look into various elements based upon which we have come up with the numbers that we anticipate. Thank you very much. Next question, please. TBS Umeza san, floor is yours. Thank you.
Regarding funding, have a question. Net cash, previous one year ago, it was more than 1,000,000,000,000 yen But I think this year, you have a substantial decline. What are the reasons for this decline, net cash? Regarding funding, you have issued bonds and so forth, you have various measures. But are you in safe position funding wise?
Cash flow will become healthy by what time in your idea? What will be the time frame? Thank you very much for your question. Regarding that question, I have Mr. Steven Ma sharing the podium, so I will ask him to explain.
UNIDENTIFIED The question, as you saw earlier from the presentation, actually our free cash our net cash position deteriorated from 1,000,000,000,000 yen to roughly $235,000,000,000 yen by end of Q1, mainly because of free cash flow is minus $815,000,000,000 in the first quarter. So it's all pretty much explained in free cash flow. And the free cash flow negative, as you know, is mainly driven by the corona or COVID impact as we had less sales or less cash in and we're still timely paying our suppliers for production they did in the past. So cash out is more than cash in. That's why we had negative $815,000,000 free cash flow in Q1.
But as we mentioned earlier, this is probably the worst and will probably recover as production recovers. And nevertheless, as we showed via Ashwani's presentation earlier, we have many ways of getting funding at this point. Since the end of last fiscal year, we got an additional JPY $895,000,000,000, almost JPY 900,000,000,000 additional COVID loans. We were able to issue bonds of JPY 70,000,000,000, and we still have uncommitted unused committed credit lines of roughly JPY 1,900,000,000,000.0. So in total, liquidity is not a bigger issue or concern at this point.
So for your last question about cash flow when will cash flow return to positive? As production and volume recovers in various markets, as Usher san mentioned just earlier, we have a pretty good chance of turning positive or close to breakeven in the second half of the year. So we watch it very carefully, and hopefully, we can have good results in second half. Thank you.
You. Moving on to the next question, Bloomberg Takesawa san. It's yours.
Shiho Takesawa of Bloomberg News. This question is for either for Uchida san or Gupta san. What will Nissan spend on research and development? And how will the investments be prioritized?
Okay. So thank you for the question. Definitely, as we explained in the Nissan NEXT, while we are doing the rationalization that we will further invest for our growth. So in terms of the number, I would have to ask a CFO on what are we spending on the previous year, which is being reported formally and what will be the level we are doing this year. But again, the message is we will make necessary investment to further to make in order for us to go for the growth path.
So I don't know, Steven, if you could elaborate a little bit about the amount, if possible.
Yes. Thank you for the question. The we are planning roughly $530,000,000,000 in R and D cost, and this is about the same level as last year.