CCC presentation

Cash Conversion CycleExternal & Internal Benchmarking

Payal KapoorFinancial Risk Management Team Intern

1

AgendaProvide update for FY15’s CCCIndicate changes between FY14 and FY15 in the case of

several of our competitors within the automotive industryDetermine causes of potential changesIndicate the lowest ranking Nissan groups by region in

regards to DSO, DPO, and DSI Analyze each shortcoming regions’ cash impact Focus on the progress or deterioration from FY14 to FY15

Cash Conversion Cycle (CCC)• Cash conversion cycle (CCC) is a measurement that shows

the time—in days—that it takes for a company to convert resource inputs into cash flows• In other words, the cash conversion cycle reflects the length

of time it takes a company to sell inventory, collect receivables, and pay its bills• For FCF, the lower the CCC number, the better

Days Sales Outstanding (DSO)

Days Sales of Inventory (DSI)

Days Payables Outstanding (DPO)

+ -

+Sales

Account Receivable

Sales

Inventory

COGS

Account Payable-CCC ays（ｄ） = × 365 × 365 × 365

3

External Benchmarking

4

Ratings and Cash Conversion for Fiscal Year 2015

50.0

40.0

30.0

20.0

10.0

-10.0

0.0

-20.0

CCC (days)

Moody’srating Aa2Aa3Baa1Baa2Baa3Ba1Ba2 A1A2A3

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• CCC of lower rated companies tends to be better than higher rated companies• Germany automakers have long CCC compared to other automakers

Nissan and Global Competitors CCC Data for Fiscal Year 2015

B MW Ford D a imler R ena ult VW GM Toyot a H onda Nissa n

27.1

-17.

6

44.2

-29.

9

45.8

-9.7

20.2

15.2

5.4

31.6

-19.

1

48.4

-34.

1

45.8

-4.7

20.1 23

.5

11.0

29.9

-21.

4

50.3

-37.

5

48.7

-13.

2

16.9

19.0

10.6

FY13 FY14 FY15

Days

Average: 11.49

1 5 432 67 89

Nissan and Global Competitors Accounts Receivable/Auto Sales Comparison (DSO)


11.3

14.8

25.4

9.8

34.3

20.5

31.5

21.6

29.3

9.2

15.6

25.1

13.4

32.2

21.9

31.0

25.8

30.6

10.5

13.4

23.0

12.4

30.4

20.9

28.7

23.9

27.1

FY13 FY14 FY15

Days

Average: 21.1

1 23 45 689 7

Nissan and Global Competitors Accounts Payable/Auto Sales Comparison (DPO)

B MW For d D a imler R ena ult VW GM Toyot a H onda Nissa n

42.7

52.6

40.0

69.4

41.9

63.9

39.8

49.1

65.2

41.3

55.8

40.8

79.3

44.5

59.5

41.4

48.2

63.4

35.5

56.4

36.6

84.8

43.9

68.4

40.1 41

.9

55.9

FY13 FY14 FY15

Days

Average:51.5

1 23 45 6789

Nissan and Global Competitors Inventory/Cost of Sales Comparison (DSI)


58.5

20.2

58.7

29.7

53.4

33.7

28.4

42.7

41.4

63.8

21.2

64.1

31.8

58.1

33.0

30.4

45.9

43.7

55.0

21.6

63.9

34.9

62.2

34.4

28.3

37.0 39

.4

FY13 FY14 FY15

Days

Average: 41.9

1 234 5 67 89

Comparison between Renault and Nissan KPI / Main factor Renault Nissan

ARAverage DSO 12.4 days 27.1 days

Inventory

Average DSI 31.8 days 39.4 days

Global sales distribution 58% of Sales in Europe, accounting for less inventory in transit

Evenly distributed global sales, but most production in AsiaMPS being reason for high SIT

Plant operation Stop production at the end of fiscal year (Dec)

Optimized production volume at the end of fiscal year (Mar)

AP

Average DPO 84.8 days 55.9 days

Average payment terms 60 days in Europe and Turkey, above 70 days in Romania, Morocco and Slovenia

55.9 days

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Internal Benchmarking

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Conclusion The most successful OEMs in terms of CCC are Renault, Ford,

and GM

German automakers tend to have higher CCC levels

Relative to it’s competitors, Nissan’s standing lies in the middle ground—room for improvement

Many of Nissan’s subsidiaries are located in Japan whose average DSO is higher than other companies

Increasing sales and decreasing COGS will benefit CCC levels

Appendix

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Ford Motor Company Changes from FY14 – FY15:

Decrease in A/R by 2.1 Increase in Inventory by .4 Increase in A/P by .6

Overall CCC DECREASE by 2.3

Potential Factors Influencing the Changes:

In FY15 Ford launched 16 new vehicles globally Increased Wholesale volume by 5% in 2015

CCC of FY14: -19.1 daysCCC of FY15: -21.4 days

General Motors Changes from FY14 – FY15:

Decrease in A/R by 1.1 Increase in Inventory by 1.5 Increase in A/P by 8.9



General Motors is the only company whose cost of goods sold decreased from fiscal year 14 to fiscal year 15


Honda Changes from FY14 – FY15:

Decrease in A/R by 1.9 Decrease in inventory by 8.9 Decrease in A/P by 4.5


In 2015 Honda was able to increase revenue by actively continuing cost reduction efforts

CCC of FY14: 23.5 daysCCC of FY15: 19.0 days


Toyota Changes from FY14 – FY15:

Decrease in A/R by 2.3 Decrease in inventory by 2.1 Decrease in A/P by 1.3



In FY15 Toyota’s unit sales in Japan decreased by 4.4%


Bavarian Motor Works Changes from FY14 – FY15:

Increase in A/R by 1.305 Decrease in inventory by 8.77 Increase in A/P by 5.76



Volkswagen Group Changes from FY14 – FY15:

Decrease in A/R by 1.8 Increase in inventory by 4.1 Decrease in A/P by .6

Overall CCC INCREASE by 2.9



Volkswagen Emission Scandal In September of 2015 the United States Environmental Protection Agency

issued a notice of violated of the Clean Air Act to Volkswagen Group after discovering that Volkswagen had programmed their turbocharged direct injection diesel engines to activate certain emission controls only when they were being tested in a lab

It was found that over 15 different car models under the Volkswagen name were being falsely advertised for their fuel emissions, causing many lawsuits against Volkswagen to be filed for the company’s fraudulent activity

The Daimler Group Changes from FY14 – FY15:

Decrease in A/R by 2.1 Decrease in inventory by .2 Decrease in A/P by 4.2

Overall CCC INCREASE by 1.9


In 2015 Mercedes-Benz expanded its global production network with the addition of a new passenger car plant in Brazil


Renault Group Changes from FY14 – FY15:

Decrease in A/R by .9 Increase in inventory by 3.1 Increase in A/P by 5.5



In 2015 Renault’s global year sales increased by 3.3% In FY15 Renault’s sales to partners increased by 1,874 million Euros


Nissan Motor Corporation• Changes from FY14 – FY15:

• Decrease in A/R by 3.55• Decrease in inventory by 4.35• Decrease in A/P by 7.42

Overall CCC DECREASE by .47Potential Factors Influencing the

Changes:


In 2015, Nissan Motor Corporation’s industry volume increased by 2.1% In FY15 Nissan's global sales amounted to 5,423,000 units, a 2.0% increase year-on-year In FY15 Nissan’s market share was 6.2% which is the same as the previous fiscal year In Japan industry volume decreased by 6.8%, sales were down 8.1% and Nissan’s market share was down .2

points to 11.6% In China industry volume increased by 6.0% and market share remained the same In North America (including Mexico and Canada), industry volume increased by 5.8%, sales increased by 9.9% In Europe, industry volume increased by 3.5%, sales increased by 9.4%, market share remained the same—

sales in Russia decreased by 32.6% In other markets (Asia and Oceania, Latin America, Middle East) our sales volume decreased by 5.9% In FY15 Nissan made a prepayment to suppliers for 37 Billion JPY, therefore affecting our A/P

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