Welcome everyone to the Nissan Financial Results for the Fiscal Year 2023 the Investors and Analysts Session. This is Julian Krell speaking, Head of Investor Relations. Thank you very much for joining. The presentation material can be found on the Nissan IR website. Please be informed of the disclaimer included on the last page of the document and read it carefully. Thank you. For today’s financial results presentation, I am joined by Mr. Uchida, CEO; and Mr. Ma, CFO. First, Mr. Uchida, CEO, will talk about Nissan NEXT Review, followed by the highlights of the fiscal year 2023 results. Then Mr. Ma, CFO, will explain the financial results. Finally, CEO, Uchida will talk about the fiscal year 2024 outlook, briefly touch on the Arc, our new business plan and shareholder return. This will be followed by a Q&A session. I am now handing over to Mr. Uchida. Thank you very much for your time.

Thank you for joining us for Nissan’s fourth quarter results for the 12-month period ending March 31, 2024. Today, we will recap the progress achieved during the Nissan NEXT Midterm Plan, which concluded at the end of March this year. And Stephen will take you through the details of our full year and fourth quarter results. I will then explain our outlook for the new fiscal year and priorities of our new business plan, the Arc. Our business transformation plan, Nissan NEXT focus on the three areas. Rationalization of both our product portfolio and production capacity, prioritizing the markets and product segments where Nissan is strongest and investment for the future in areas including electrification, autonomous driving and battery technology. With these actions, we achieved our goal of both reducing production capacity and streamlining our product portfolio by 20%. We launched all 12 models ahead of schedule and the quality of sales improved. We elevated our Alliance to the next level. Taken together, these actions refocus Nissan on generating value rather than seeking volume. These steps laid a solid foundation for future growth while maintaining profitability. We have refreshed our model portfolio, achieved solid profitability, free cash flow and net cash are improving significantly. We have made strategic investments in future products, technologies and enhanced our partnerships. We have prioritized returns to shareholders, as shown by our resumed dividend. In fiscal year 2023, we delivered steady results. Net revenue increased 20% year-over-year, operating profit rose 51% and net income increased 92% year-on-year. This was a resilient performance in a challenging market environment with more fragmentation and increased competition. Stephen will now take you through our results in more details. Go ahead, please?

Thank you, Uchida-san. In the fiscal year 2023, total global retail sales increased by 4% year-over-year to 3.44 million units. Excluding China, unit sales rose by 17%, reflecting healthy demand in all regions, including Japan, North America and Europe. In Japan, unit sales rose by 6.5%, in North America by 23% and in Europe by 17% and other markets by 14%. In China, retail sales fell by 24% to 794,000 units. Global production followed a similar pattern, rising by 1.5% to 3.43 million units. Outside of China, output rose 14% to 2.65 million units. Production in China decreased by 26% as we adjusted supply to demand. Following the -- for the three-month period ending March 31, 2024, global retail sales increased by 12% year-over-year. All regions showed a healthy growth, including China, where unit sales rose by 19% and production increased by almost 33%. For the first time this year, sales exceeded 1 million units for a quarter. Globally, Q4 production volume increased by 4.9%. Turning to our performance in key markets. In Japan, our unit sales increased by 6.5% and rising demand for award-winning models such as Sakura and DAYZ. The proportion of electrified sales rose to 52%. Reflecting our focus on value over volume, net revenue per unit increased by 12%. Production in Japan rose by 22%, with a sharp increase of 30% in export production. In the fourth quarter, retail sales rose by 2.5% and production was up by 3.8%. In North America, retail sales grew by 23% to 1.26 million units. Sales in the U.S. increased by 20% to 916,000 units, with good momentum from key models such as Rogue and Sentra. Mexico continued strong sales momentum, maintaining market leadership for 16 consecutive years. Canada saw a solid growth of 34% year-over-year. The U.S. net revenue per unit was down by 8% due to model mix and industry-wide higher incentive. For the year, production in region rose 24% to 1.24 million units. In the fourth quarter, unit sales rose by 9% and production was up 4.4%. In Europe, retail sales rose by 17% to 361,000 units. Our electrification mix improved to 47% and revenue per unit increased by 4%. This reflected solid demand for e-POWER variants of Qashqai and X-Trail. Production was up 12.9% for the year. In the fourth quarter, unit sales rose by 17.5% and production remained at 81,000 units. Although market conditions in China continued to be challenging, we saw positive year-over-year growth for two consecutive quarters. In the fourth quarter of calendar year 2023, our unit sales rose by 19%. In the first quarter of this calendar year, retail sales grew by 3.3% to 167,000 units. Our Sylphy model remained the market leader in the ICE passenger vehicle segment. Net revenue per unit decreased by 9%, reflecting market conditions. For the calendar year 2023, retail sales were down by 16% and production was down by 19%. This slide shows our key financial performance indicators on equity basis for both full year and the fourth quarter. Net revenue for the year increased by 20% to JPY12.7 trillion. Operating profit for the period increased to JPY569 billion, representing a solid operating margin of 4.5%. This includes a positive impact of JPY38.8 billion as we reversed provision related to legal proceedings following the recent favorable ruling. Net income totaled to JPY426.6 billion, including impact of JPY54.5 billion provision adjustment. This increase in operating profit and net income compared to April 19 forecast revision is due to the reversal of previously recorded litigation provision. Free cash flow for the automotive business was a positive JPY323 billion. Net cash for the automotive business was a healthy JPY1.55 trillion, even after buying back 5% of shares in Q3 for JPY120 billion. The share buyback announced on March 27 will be reflected in our first quarter result for the fiscal year 2024 as the transaction was settled in April. For the fourth quarter of the fiscal year 2023, net revenue rose to JPY3.5 trillion and the operating profit was JPY90 billion, including the litigation impact, representing operating margin of 2.6%. Net income for the quarter was JPY101 billion and automotive free cash flow was JPY141 billion. Turning to our 12-month financial performance. Net revenue increased by JPY2.09 trillion to JPY12.7 trillion. Operating profit increased by JPY192 billion to JPY569 billion. Non-operating income, which includes equity method company, totaled JPY133 billion. Our results were impacted by extraordinary losses of JPY103 billion, which included impairment costs associated with the restructuring in India. Net income nearly doubled to JPY427 billion. This slide shows the variance factors from last year to this year. Foreign exchange had a positive impact of JPY12.9 billion. The U.S. dollar remains strong with a positive impact of almost JPY150 billion, but was offset by emerging market currency, especially the Argentinian peso, Mexican peso and Turkish lira. Raw material costs decreased mainly due to steel and aluminum. And our sales performance had a positive impact of JPY325 billion, driven by strong volume and volume and model mix. Monozukuri costs had a negative impact of JPY205 billion, including cost relief for suppliers and increasing inflation, logistics and regulatory costs. As a result, operating profit improved to JPY569 billion even in dynamic conditions, thanks to the strong effort of our employees and our focus on priorities set out in Nissan NEXT. In the final quarter, we saw a JPY19.4 billion benefit from currency movement and JPY14.7 billion benefit from raw material. Our sales performance contributed JPY39.7 billion, while Monozukuri costs increased by JPY126 billion, which includes inflation and cost relief for suppliers. With other factors contributing JPY54.8 billion, this led to an operating profit of JPY90.3 billion. In summary, we have come a long way since the start of Nissan NEXT, improving every aspect of our business and laying a strong foundation for future growth while ensuring profitability. Uchida-san will now explain the outlook for fiscal year 2024.

Thank you. Having reviewed last year, let us look ahead of 2024. We expect demand for refreshed and new models to drive unit sales growth of more than 7.5% to 3.7 million units. China unit sales are expected to be up ominously at 800,000 units. Japan sales are forecast to rise by 3.3% to 500,000 units. North American sales are expected to rise 13.3% to 1.43 million units. European sales could rise 6.5% to 385,000 units and by 8.2% to 585,000 units in other markets. We expect a 2% rise in global production volume to 3.5 million units. Let me walk you through the plan by region. In Japan and ASEAN, we anticipate further sales momentum driven by models including the Note, the Sakura, Serena and DAYZ. We will reinforce our leadership in electrification through a wide range of EV and e-POWER models. In the United States and the Americas, we expect growth in the current year to be driven by the key models such as the Sentra, Versa, and the all-new Kicks in the affordable segment. We will refresh core models, including Armada, Murano and INFINITI QX80. Sales momentum in Mexico is also expected to continue with Versa and all-new Kicks. Turning to AMIEO. In Europe, the product offensive in electrified vehicles will continue with the Ariya, e-POWER variants of the Qashqai, X-Trail and Juke hybrid. In the Middle East, we will launch the all-new Patrol and INFINITI QX80. In India, we will introduce a new Magnite and expand our exports. Lastly, in China, we will continue to develop new vehicles in China tailored to the demand, we will also start production of the new energy vehicles, we will ramp up sales of the all-new Pathfinder. This slide shows the financial outlook for the fiscal year 2024. Net revenues are expected to improve by JPY914 billion to JPY13.6 trillion. We are forecasting operating profit will improve by JPY31.3 billion to JPY600 billion. Net income is expected to decline to JPY380 billion. This is the step chart that explains the change from the fiscal year 2023 performance and the fiscal year 2024 outlook. JPY70 billion expected to come from forex benefits and JPY30 billion is anticipated from raw material cost. Sales performance is forecast to improve by JPY20 billion, thanks to volume increase, partially offset by selling expenses and mix. Monozukuri costs are likely to improve by JPY80 billion. On the other hand, we expect a total headwind of JPY100 billion of inflation costs. Others is expected to have a negative impact of JPY68.7 billion, which includes impact of credit -- net credit loss and remarketing, as well as the absence of the positive tentative impact recognized in Q4. We expect all this to result in JPY600 billion of operating profit forecast for the year. We aim to grow shareholder returns consistently, reflecting the underlying strength of our business. The dividend proposal for fiscal 2023 is JPY20 per share. This includes the interim dividend of JPY5 per share, which was already paid in the first half and the JPY15 per share year-end dividend. This is a JPY10 increase from the prior year. We are planning to increase dividend payout to JPY25 or more per share in fiscal year 2024. Our shareholder return for fiscal year 2024 is expected to be more than 30%, including the dividend and the 2.5% share buyback settled in April. Our growth is informed by the Arc plan, which bridges the Nissan NEXT transformation plan and our long-term vision Nissan Ambition 2030. The Arc is a detailed roadmap for Nissan’s growth helping us to achieve our Ambition 2030 goals. In the Arc plan, we have grouped our actions into two parts. First, Nissan will focus on securing volume growth through balanced product offerings while taking necessary actions for the future. In parallel, we intend to make EVs cost competitive to optimize our manufacturing supply chain and enhance our market approach. Through smarter partnerships and new technologies, we will deliver mobility solutions with unique innovations. The plan will not only aid our transformation innovation but will create new revenue streams, thus setting up Nissan for long-term growth. As part of our Arc delivery, we are planning to generate shareholder returns of 30% or more and to steadily increase dividend per share in the coming years. In summary, Nissan improved its strong fundamentals during the transformation period. We are on track to achieve success in 2024 and for the coming years. Nissan will continuously enhance its offering with innovations and improvements at every stage of the product life cycle. This will enable us to grow and maintain profitability in increasingly challenging and fragmenting market conditions. I will close the presentation with a short video showcasing our product offering before we take your questions. Thank you for your attention. [Video Presentation]

[Operator Instructions] Morgan Stanley MUFG Securities, Kakiuchi-san. Please go ahead.

Yes. This is Morgan Stanley. My name is Kakiuchi.

Yes. Go ahead.

Yes. The first question is about supplier’s support, which is impacting on the profit. For the fiscal year 2023, JPY60 billion is booked. That’s what I believe. If possible, could you give us a regional, what is the biggest one in regional, what is the regional breakdown? In the fourth quarter, Europe profit is deteriorating, so maybe that’s the impact. Am I right? And for the fiscal year 2024, this supplier support will no longer appear and this will be a positive side by labor costs because of inflation support, you are booking JPY100 billion. Am I right? This is my first part of the question. And the second question, this plan for this fiscal year, the sales -- for sales is 3.7 million units. That’s what you explained. How about the production plan? It’s 3.5 million units, right? So what’s the gap between 3.5 and 3.7? What’s the difference here? Is it about the inventories? Could you elaborate on the gap production plan and the sales plan?

Thank you for your question. Let me talk about the overall status and then I would like to ask CFO to provide you with the financial details. Starting with, in the end of March, we booked the expenses. Volume decrease is one portion and supplier support. And R&D, we accelerate some of the R&D. In total, the impact besides volume preparation, what we provided is JPY60 billion. That’s the figure that we gave. Out of which -- if we exclude R&D, but the majority is support to the suppliers and it’s 50-50, by the way, just to give an image. Part of it is after we fixed the Arc, once we know the future sales volume, I guess, what suppliers invested for the future, there was a part that we have to pay. There are some models which are falling short of the volume assumption. So this is the OEM’s responsibility that we support. And today, in the environment, suppliers are facing inflation. We did take care of inflation last year, but if you look at the global picture, we believe that there is a necessity to support this and this is the half -- the remaining half. In terms of regions, North America, Europe is the big ones. That’s the image. And the second part of the question, inventory, the gap between production plan and sales plan. Stephen?

Sure. Thank you, Kakiuchi-san, for the question. Just to add to Uchida-san’s comment about supplier costs, at this point, we cannot give you a specific number of what’s in there for supplier costs, as Uchida-san mentioned. We are not able to provide a regional breakdown either. But of course, this covers suppliers that we have globally as well as locally. So you will have some impact in some of the regions as well. Also, for the inflation, as a matter of normal practice, we let the supplier pass on inflation costs to us every year. So we take and we pay for the inflation-related costs every year. For the other kind of cost relief for the fact that we had lower sales volume in the last few years, we work with each supplier and each supplier has their own unique specific condition, depending on how much they invested to support us. We will look at each one of them and we work with them one-by-one, case-by-case. So we set aside some money for this. As I said, I cannot give you a specific number, because it’s kind of confidential to what we’re doing with each supplier, each case. So please understand that. Second question was more about the retail versus production. And you’re right, our aim is for next year to reduce inventory globally. As you saw in the announcement deck in the appendix, our inventory has come up slightly this year. I think on Page 46 in the appendix, we have inventories come up. And if you remember in the last quarter, Q3, it come up quite a bit, because we had a little bit of a surplus of Malia 23 Road [ph] in the U.S. The sell-off -- sell-down of that has actually been progressing very well. We are down to a minimal level now. So our aim is that for next year, we will manage more efficiently the whole car flow, meaning the whole value chain, so that we can work with lower inventories. Now that supply chain has more or less normalized. So in the past, we had to sort of build up a certain stock just to make sure. So now we can, for next year, should be able to go back to more normal conditions where we can hopefully manage with more leaner and more efficient stock levels. So that’s the intention in the volume plan for next year. Does that answer your question, Kakiuchi-san?

Yes. Thank you. With regards to the first question, today, Kasai -- you announced the investment in Kasai Kogyo. On this point, well, I -- well, Kasai Kogyo has been making losses for several years and this is exceptional. Kasai Kogyo is dealing with Honda as well on top of Nissan’s business and Nissan is providing support to Kasai Kogyo. So it should be seen as an exceptional case or will this kind of case appear with other suppliers as well?

In terms of approach, we will continue communicating with the partners and communicating and provide support at need with flexibility. This is our strategy. With regards to Kasai Kogyo, the operational risk, we -- Kasai Kogyo may be a big risk on our supply chain, so we decided to invest in this entity. For long years, Kasai Kogyo has been dealing with Nissan with a big business, so Kasai Kogyo excels in technology and operation and has been leading the industry. So through the support, we would like to enhance the liquidity of Kasai Kogyo and aid the growth of Kasai Kogyo and technology development and this will result in the customer satisfaction of Nissan and our operation. In that sense, in many aspects, business circumstances will grow more challenging, so close collaboration with suppliers will be important, as I said in the Arc. Going forward, we need to work on cost competitiveness with suppliers. So in that sense, today, business climate, as you may know, is very challenging indeed, so we need to have a closer collaboration with all the suppliers. I’m not sure whether this is a straightforward answer to your question, but that’s our basic approach. And earlier, you asked about this. In fiscal year 2024, are we going to reckon this one-time relief to supplier? As Stephen said, we will provide support which is necessary and this is booked in the inflation cost. And if our volume, we are looking at the volume in the past years, and if suppliers is bearing the big burden, Nissan is booking the provision for this to support this.

I see. Thank you for the elaboration.

Okay. Thank you so much. Moving on to Goldman Sachs, Yuzawa-san. Please go ahead.

Yes. Goldman Sachs. My name is Yuzawa. Thank you. The first question is about free cash flow. For the actual result, it’s pretty healthy and what’s the background here? And full year guidance, what is the projection for free cash flow for fiscal year 2024? Renault, 7%. Part of 7% was bought back by Nissan, but what happens to the remainder of the 7%? And shareholder return of 30%, which means that you cannot absorb the one that is offered by Renault. So how free cash flow is generated and the share buyback, how does it relate to this free cash flow? That’s one thing that I would like to ask you. And the second one, CapEx seems to be big. JPY620 billion, was it? R&D expenses, if I may. I don’t think there is a change in the R&D. In the Arc, you said 7% to 8% of the ratio against the revenue and is it increasing over the 7% to 8%? Does advanced investment is increasing? Why? And how does it relate to what you defined in the Arc? Is it consistent with what you described in the Arc? Thank you. These are the two questions.

Thank you, Yuzawa-san. I was expecting you to ask those questions, so let me address them for you. Good to hear -- listen to you again. So the free cash flow, we are very pleased with the free cash flow generation in the second -- in the FY 2023. As you notice, a lot of it is, of course, coming from cash in from operations. As we generate more profit, we get more cash in. Also, we try to manage our working capital, where we got some benefit from the working capital this year. Those are the two main reasons that we are able to generate free cash flow positive in 3/2023 for this year, which is our equity base is good. As usual, we do not give the free cash flow guidance for the next year. And of course, given that we already announced a dividend forecast for next year, for sure free cash will be positive and you will be healthy level. Right now, I am not -- I cannot provide the actual number, but it should be similar if everything goes well. So that’s the first question. The second question is about share buyback. Renault offered to sell 7%. We elected to buy back 2.5% and the remaining 4.5% will follow the prescribed mechanism we agreed in the arrangement with them. Whereas, we, Nissan, the next step can either designate a buyer to buy, take over those shares or Renault will go through an orderly organized process to sell those to institutional investors mainly. So, right now, we are about to go to the second step and then we’ll see how it goes from there. So they have up to 180 days to go through the next couple of steps. So it’s still some time left to proceed. So right now we chose to only buy back 2.5%, because as you rightly noticed, CapEx has gone up a lot. We want to save our cash a little bit for the investment need that we just announced in the Arc. As you can imagine, 30 new cars in three years is no small challenge. It’s very big. So we are having a lot of investment need for next year, which is why you see the big increase in JPPY620 billion forecast for next year. The JPY620 billion is roughly JPY135 billion increase over this year. And of that JPY135 billion increase, roughly JPY100 billion is for electrification-related and roughly JPY60 billion is for new products. And then we reduced some of the investment for other things as traditional. So it’s a mixture of things, but we are investing heavily to prepare ourselves for the Arc and the vehicle coming in there. In terms of ratio, we gave a reference guide of 7% to 8% over long-term as a steady kind of a guide. R&D plus CapEx, 7% to 8%. As you notice, probably in Q4, if you did the calculation, R&D plus CapEx as a percentage of net revenue is like 12%. It’s very high. This is exactly what we just mentioned earlier. Given that we finalized the Arc, we decided to pull ahead some of the R&D and CapEx into this year. We are able to -- luckily, with the good free cash flow, we’re able to fund it and we have now accelerated some of the investment for future. So I think those are your three questions, Yuzawa-san. That’s the answer.

Thank you. Yes. Another one. Within 180 days, you said, as a result, inventories will be reduced and you are confident of a free cash flow. So is there a possibility that you can buy more than 2.5%? And the second one, R&D expenses for 2024, how much is it?

R&D expense for 2024, we usually don’t disclose that kind of detail. I think you have to wait for Q1 announcement. You can see actual -- maybe see some of the actuals. But we usually don’t give the full amount. It’s increased year-over-year, for sure. Similar to what we do for CapEx. That’s what I can tell you. Regarding the share buyback for the remaining shares for right now, we’re still discussing with them. We haven’t made up our decision or made up our mind. But I think we got a lot of feedback from some of our shareholders that they are also looking to have increased dividends. So we’re trying to balance the two, which is why for the year-end dividend, you saw we increased our final year-end dividend to JPY15, so full year is JPY20 and also increasing dividend for next year. So we will see the reaction to that and then we will judge as we go through the year.

Thank you so much.

Thank you very much. Next, Citigroup Securities, Yoshida-san. Please go ahead.

Thank you very much. I would like to deepen my understanding on outlook. Q4 operating margin, if we exclude the reversal of provision, it’s probably around 1.5%. On the other hand, for this fiscal year, for the full year, your outlook is 4.4%. In Q4, there was a one-time off seasonality dip. So if that’s transitional and one-time off, how much was the one-time off amount and in the current fiscal year, you’re expecting a significant improvement, like a convection. Can you elaborate? Second question, North America, relatively speaking, in comparison to your peers, brand capability and product lineup strength, how has those indicators changed in the past few years? What’s your take? Incentive, according to external data, according to database, you’re regaining your high profile and against other Japanese OEMs, you are recovering your status. North America, we can’t, however, be confident that you are improving in North America. That’s probably the reason why convection isn’t improving from the external perspective. New models will be introduced, but are they equipped with brand strength? Are they strong products? Those are my two questions. Thank you.

On your first question, I will ask our CFO to respond. Regarding the second question on the United States. First of all, in terms of the number of units, it’s come back to historical levels. Rather than focusing on those dimensions, as I talked about to the media people, in comparison to pre-pandemic days, if we look at the recovery of other OEMs, unfortunately, in the case of Nissan, we have not gone back to the previous level, FY 2018. Against the number of units, how did we do in 2023? If we do a one-on-one comparison, we have not regained to the pre-pandemic level. Yes, there was a shrinkage of the market, but even in comparison to our peers, our recovery hasn’t been so strong. So if we look at the United States for full year 2023, although the number of units on year-on-year basis has improved, is this the underlying strength? There are areas where we haven’t recovered. What happened in 2023? Yes, the supply-side challenges were more tough for us than our peers. So gaining strength in those areas would lead to balanced inventory, as we spoke, and in the affordable segment, Kicks, Versa, Sentra, these models, in that market segment, we need to regain presence. But quality of sales, we won’t sacrifice quality of sales. We want to maintain quality of sales and regain presence and achieve volume as well. So that’s the backdrop to our outlook for 2026. You also spoke about the incentives for PHEV, FEV, in the United States. Because we don’t have models, if we compare the incentive, there are zones where we don’t need incentive in the FEV sector, but in ICE sector, the incentive for ICE cars is cheaper than other competitors. So we are competitive and we’ve been able to sell our products by maintaining quality of sales. And how do we strengthen the brand power of our product lineup portfolio? The high net worth versus affordable, those are the two segments where there is high needs in the United States market. And in New York. QX80 is popular with its functionality and where you have confidence, and as you can see, Kicks as well. At the New York Motor Show, this gained popularity. So by our customers, potential customers, understanding the values, 3.7 million units, 14% year-on-year growth in North America. So we will increase presence through these models, and by maintaining quality of sales, we will achieve underlying number of units as we offer our products to our customers.

Regarding the first question about the Q4 profit percentage. You’re right, there’s multiple factors at play here for the Q4. One, as you already highlighted, we have normal seasonality, where Q4 typically is a lower margin quarter for us as it’s towards the year-end, a lot of costs and expenses are happening. So typically our Q4 profit margin is like 1 percentage point to 2 percentage points lower than four-year average. That’s perfectly normal. Secondly, we had two unusual items in this Q4. One is the cost relief provision and the other one is the reversal of the litigation provision. The reversal of the litigation provision is very simple. It’s just JPY38.8 billion that we reversed above OP and below OP in non-operating, we also reversed some of the potential FX losses that we had to book given that yen was depreciating in the last couple of years. So we had also booked another JPY15.5 billion for FX loss potentially. So we also able to reverse that below OP. So this is why for the litigation provision, there’s above OP of JPY38.8 billion and below OP of JPY15.5 billion, so a total of about JPY54 billion from the income base. So that’s for that one. Unfortunately, as I mentioned earlier, I cannot give you the exact number for the one-time for the supplier cost, how much that is, but I think you can sort of guesstimate from the step chart roughly for your own estimation. You can see that inflation is JPY49.1 billion, and others in the monocyclic cost is JPY62 billion negative, a large portion of that is for those kind of costs. I cannot give you the exact number, but those are the kind of costs that we have in those two categories. That’s where you will see it. Not all of it is, but some of the majority of that is. So your final question is, what would be -- if I adjust out these abnormal items, what will be the profit margin in Q4, because you want to use as an indicator for next year, I fully understand. Based on my own internal estimation, Q4 without this litigation provision and supplier kind of cost relief should be somewhere between 3% to 4% OP margin, which is fairly healthy. So I think it’s upper end of that probably, but it’s a pretty healthy Q4 in my opinion. So I think it’s a good stepping stone for the future quarters. Yoshida-san, I have given you enough indication?

Yes. Thank you very much.

Thank you. Moving on to UBS Securities, Takahashi-san, it’s yours.

Yes. This is Takahashi from UBS. Starting with the first one, in fiscal year 2024, retail sales plan in North America is 170,000 units increase year-on-year. In your elaboration, you talk about Kicks, Versa, and Sentra, affordable segment will increase largely. If possible, U.S., Mexico, Canada, if you -- could you divide all these countries and give us a breakdown of the volume or these three models, affordable segment, how much are you going to boost the volume in affordable segment? That’s the first part of the question. Why am I asking this question? Because U.S., affordable -- besides affordable segment, things are challenging in U.S. So Nissan, can you keep the quality of sales? I think this will be the testing period. So if you are bullish about the volume, you may pursue volume than value, but I would like to make sure that’s not the case. And the second point, the Arc, fiscal year 2024, what is the positioning of the initial year of the Arc? How significant it is? It can be qualitative. So could you explain? Operating margin, in order to recover operating margin, in fiscal year 2024, fixed costs may rise, but volume increase, how are you going to improve the operating margin? You are still in the preparation in fiscal year 2024. New models will be introduced, but not in large numbers this year, right? So financially, when will the operating margin improve visibly? At the earliest, it will be in the latter half of fiscal year 2026. I think the operating margin will improve significantly in the final year of the Arc, if you look at the plan for fiscal year 2024 and the new product plan. Am I right? This fiscal year, I hope you are on track. I want to see, is there any exceptional factors to be considered in 2024? What’s the positioning of 2024 in the three-year plan? Thank you.

When I talk about the Arc, I talk about the upcoming new models. Out of the 30 new models in Nissan brand, we have 15 and we gave you a rough breakdown by year. So as you indicated, in 2025 and 2026, the profitability, highly profitable models, I’m not sure whether this is the right way to express it, by high profitable models will come out in 2025 or 2026. So in 2024, we would like to boost the basic volume first with the lineup. That’s the positioning of fiscal year 2024. As I said earlier, in North America, in affordable segment, are we supplying enough in affordable segment? No, there were a lot of supply chain challenges in 2023, including logistics and we have been solving them, taking action, and in the fourth quarter, we supplied a lot. However, in the final quarter of 2023, as I have referred to, Rogue model year, there was a switch over the model year of Rogue, and that was an issue and that is why incentives rose. So after April, we will boost the volume of affordable models. That’s the strategy that we have. And Japan, no, U.S., in Americas, North America, Mexico, Mexico, as you may know, in March, market share was 18.9%, was it? I don’t have the precise number, but we were at a high level. And in Mexico, we would like to use the sales power to boost the volume and increase the share in the market. So in Mexico, for example, in TIV, we don’t assume a big number for TIV. But if that TIV -- according to our perception, TIV will increase by 4% year-on-year and double digit growth is what we’re expecting. America says 13.3% growth. If you divide it in U.S. and Mexico, it will be kind of similar. Oh, by model, as you said, Sentra, Versa, Kicks, but Pathfinder and Frontier, these bigger models will -- we would like to boost the share. We talk about the base volume. We would like to boost the base volume with these models as well. But as I said, we are not going to spend big amount of incentives. Rather, we would like the customers to appreciate the value and be ready to pay for it. That’s a strategy.

Can I add to that also, Takahashi-san? So as we said before as well, Nissan aims to build a balanced portfolio and then the electrification speed is determined, is based on the customer taste and what the customer trend is. And right now in the U.S. market, you can see sort of slowing down for EV, pure EV, but hybrids picking up. So we are obviously reconfiguring our plan in the Arc where we’re going to introduce e-POWER to the US. And also as mentioned by our partner Mitsubishi Motors, we’re going to do a plug-in hybrid together with them for North American market. So the first year, next year, FY 2024 is very critical part for us because we are launching four very, very good SUVs, as Uchida-san mentioned, the Kicks, the QX80, the Armada and the Murano. These are all good, very profitable ICE vehicle, but also in high demand. Yes, they are mass market who’s moving towards more affordable, because interest rate and inflation still high, but eventually interest rate inflation will come down in the U.S. As they come down, then they will move back up maybe into the market a little bit more to more premium. While the rich customer, more higher household customers, they are still buying the higher end vehicle. So the launch of the QX80, as Uchida-san mentioned, we just launched it in New York and they will go on sale in summer and this will be probably the highest price Nissan company has ever offered, other than GTR, that’s targeting those premium customers. So we are having good expectation, high hopes for these four cars, contributing FY 2024 and FY 2025.

Thank you.

Okay. Moving on to JPMorgan Securities, Kishimoto-san, please.

Yes. JPMorgan, Kishimoto is speaking. Thank you for the opportunity. I have two questions. The first one, is China operation, what is the cash flow in China operation in the fiscal year 2023, and as well as 2022? If you look at China operation, it’s a cash burn I believe. In the fourth quarter in 2023, Chinese sales are picking up. However, with this situation, free cash flow, if you think about competitive landscape for the fiscal year 2024, there seems to be concern about the free cash flow. So for fiscal year 2024, the sales volume in China is stable year-on-year. But how about the cash? What is the cash projection in China? Could you elaborate on this? In the past, Chinese operation was benefiting from high cash flow with a cash cost [ph] business. But going forward, in terms of cash, wouldn’t China be a risk in the future? I want elaboration here. This is the first part of the question. And the second one is a simple question. Earlier, there was a question. There is a huge gap between production and retail. So you need to adjust the inventories to a large extent, I believe. And operating profit variant analysis tells me the JPY10 billion of negative is due to mix and volume. So can you expect the volume will not increase? Is there any -- what are the factors behind this? Could you elaborate on this? These are the two questions. Thank you.

So, let me address those, Kishimoto-san. First of all, our China joint venture, DFL, actually is cash cost -- cash flow positive. It’s still net cash flow positive. So they are operating with -- still is -- as you pointed out, it’s not nearly as high as it used to be, but it’s still positive. That’s the first thing. If you’re looking at the difference between the equity-based free cash flow and the proportional base free cash flow, and therefore, deducting that it’s negative for China operation, there’s a slight accounting adjustment in here as well that you don’t see, which is in the past, we used to get dividends from China. This will help the free cash flow on the equity base. So we are getting less dividend, which is why we are seeing this kind of difference of this 2 basis free cash flow. But rest assured, the cash flow of our China operation is still positive. We’re just not able to get as much dividend anymore from it. So for the next couple of years, as mentioned previously, we are in the transition period until we get the new -- five new Nissan-branded new energy vehicle and also the other new energy vehicle of Nissan brand. So we will be launching these new cars. So this year and next year will be sort of transition period until we get back to growth mode again. Second point is the production versus retail. Yes, you’re right. We are trying to, as I mentioned earlier, trying to adjust the inventory more to a stable level. Now that supply is no longer as big of a concern as it was the last few years, so we can go back to more efficient, stable production and hopefully keep a smaller amount of inventory. And in the volume mix in here that you show in the step chart, actually its volume is positive contribution, obviously, because we have increased volume. The issue is the mix as we are trying to sell more EVs in the U.S. So, of course, we are not as profitable on the EVs as we are on the ICE. So as we are trying to reposition the area and also providing more leaves to our customers on a portfolio base is a negative to the mix. So that’s why you see a net negative here. But of course, selling more of these area leave will help us in overall Café and other compliance requirements. So this is net-net is beneficial for us. It’s just on this step chart will show up as a net negative on mix. Does that answer your question, Kishimoto-san?

Thank you. The second one. Yes. If so, there will be a positive side from the supply to the market. But if you increase the sales of BEV, this will be the negative impact. And BEV, LEAF, you are going to boost the volume of Nissan LEAF. Am I right?

Got more supply of batteries now, so we are able to sell more. And also, as you might have seen starting from March, we will qualify also partially for the IRA benefit subsidy for the LEAF. So we will be able to enjoy that. And of course, as you know, in the U.S. market, Café credit or Café requirements are escalating year by year. So by enriching our mix slightly, it helps us overall. So, net-net, from a business case point of view, it makes sense, and also it goes with our initiative to improve the electrification mix in our portfolio in the U.S.

That was clear. Thank you.

Due to time constraints, the next question will be the final question. Daiwa Securities, Hakomori-san. Please go ahead.

Hakomori of Daiwa Securities. I hope you can hear me.

Yes. We hear you.

Thank you very much. I have two questions. First, on the same page, variance analysis, Page 23, sales performance plus JPY30 billion. What’s the backdrop to the estimate? It will be a year of intense competition. So we expected negative figures, but you are expecting positive contribution. Why? S&P credit rating is the second question. There was downgrading one year ago and one of your priorities was to gain back your rating, according to Mr. Ma. BB+ continues to be the rating against Nissan. So what is your thinking? And in actual business, has the downgrade had any impact? Could you update us on the impact from the ratings perspective? Those are my two questions.

Hakomori-san, so sales performance here, I think you’re referring to the breakdown below where we show the selling expense and pricing positive JPY30 billion. As you saw from Uchida-san presentation, we are launching several new models. As we’re launching the new models, they require less incentive. And also from last year, if you remember, last quarter, we had to spend a lot more incentive on selling down the old model year 2023 road. So we don’t have to do that if we manage properly going forward. Plus, we had a new model which required less incentive. That’s why you see a net positive JPY30 billion here.

Pricing.

And pricing, of course, and pricing that of the new model, we are pricing properly. Thank you, Uchida-san. So it’s a combination of selling expense and pricing. That’s why it’s positive JPY30 billion. For the S&P rating, yes, obviously, given how well we performed the last couple of years and how much we progressed, we were hoping that S&P could alter their assessment of our rating and outlook. Unfortunately, we are working with them every quarter. We’ve been trying to convince them. So far, it’s more of a view of their overall sector that they have. That’s sort of holding us back. But we are still working with them. I’m hoping with this good result we have for the full year and Q4, as well as the outlook for next year, we will for sure talk to them again and work with them and see if we can increase it. And of course, with them as having us a non-investment rate -- rating, it had some impact on our cost of borrowing. But as you also saw from last year, we were able to get a Fitch also rate as an investment grade. So we’ve been able to offset. Sorry, so we’ve been working on this to work with Standard & Poor’s, and we will try to convince them that we are on a solid trajectory towards sustainable profitability and recovery. As mentioned before, we -- like Nissan NEXT, we got to the profit level we wanted to. We ended up a little bit higher, 4.5%. Nissan NEXT, we said 4.2%. And in Arc, we said that now we will maintain this margin, slowly increase, but we want to grow because our scale should be much bigger than this. And when we get the scale, we should have better profitability. So Hakomori-san, does that answer your two questions?

Yes. Thank you very much.

Okay. Thank you.

So now we will close the session. Thank you very much for your participation today. The Nissan Investor Relations team remains at your disposal for any follow-up questions. Thank you and bye-bye.