(The following statement was released by the rating agency) SINGAPORE/SEOUL, January 29 (Fitch) Fitch Ratings has affirmed Nissan Motor Co., Ltd.’s (Nissan) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) and senior unsecured debt rating at ‘BBB’. The Outlook is Stable. Fitch has also affirmed the company’s Short-Term Foreign- and Local-Currency IDR at ‘F3’. Nissan’s ratings and Stable Outlook reflect expectations of a modest growth outlook in global automobile demand in 2014, driven by continued growth in in the US and China and a gradual recovery in Europe, which will offset a moderate decline in Japan. We expect Nissan’s credit metrics to remain well within our guideline for a ‘BBB’ rating, despite our forecast for a slight decline in profitability and higher capex in the financial year ending March 2014 (FY14). KEY RATING DRIVERS Sales Volume in Key Markets: We expect Nissan’s vehicle sales to continue to grow in the US and China as Nissan benefits from a boosted product portfolio. In China, Nissan is likely to continue to regain its market share lost following a territorial dispute between China and Japan in September 2012, although a resumption of tensions between the two countries remains a risk. In Europe, intense price competition and volatile consumer demand, with the exception of the UK, is likely to limit Nissan’s volume growth. We expect Nissan’s vehicle sales in Japan to be dampened in FY15 by an increase in sales tax, but will improve in FY16, albeit at modest rates. Lower Profitability in FY14, Improvement Thereafter: We expect Nissan’s profitability to decline slightly in FY14. EBIT margins (automotive) declined to 3.2% in 1HFY14 from 4.2% a year earlier due to costly recalls and a sharper-than-expected fall in vehicle sales in certain emerging markets as well as weakness in European sales. We expect a gradual improvement in Nissan’s profitability from FY15 due to a boosted product portfolio, continued vehicle sales growth in key markets and cost control. However, unexpected auto demand downturns in Nissan’s key markets or higher-than-expected competition, particularly in the US and China, could weigh on profits. Stable Financial Profile: We expect Nissan’s capex as a percentage of revenue to peak in FY14 primarily due to investments in production facilities in the emerging markets, which will contribute to negative free cash flow in that year. Capex, together with increased dividends, will contribute to reduced, though positive, FCF in FY15-17. Nissan’s financial profile is likely to remain stable, however, with net leverage (adjusted net debt to EBITDAR) at below 1.0x through to FY17 (FY13: 0.7x). Increased Production Overseas: We expect Nissan to benefit from efforts to mitigate exposure to currency fluctuations by expanding overseas production capacity and sourcing components from low-cost countries, particularly in the emerging markets. Operational Linkages with Renault: The strategic, operational, and management linkages between Nissan and its major shareholder and alliance partner by cross-shareholding, Renault SA (BB+/Positive), could become stronger as both automakers are trying to obtain more synergies from the alliance in a difficult industry environment. However Fitch believes that previous actions, such as the scrapping of Nissan’s dividend during the economic crisis, indicate a relatively low likelihood of cash flows or assets at Nissan being used to support Renault’s credit profile. This indicates that the impact of Renault’s credit profile on Nissan’s would not be as significant as the linkage analysis may otherwise suggest. RATING SENSITIVITIES: Negative: Future developments that may collectively or individually lead to negative rating actions include: - Substantial deterioration in global auto demand - Sustained negative FCF - Adjusted net debt/operating EBITDAR remaining above 1.0x on a sustained basis - Meaningful downgrade in Renault SA’s (BB+/Positive) rating Positive: Future developments that may collectively or individually lead to positive rating actions include: - A continued improvement in business profile and market share gains in major markets - Adjusted net debt/operating EBITDAR staying close to net cash on a sustained basis - Double-digit EBITDAR margins (FY13: 8.1%). Contact: Primary Analyst Isabelle Katsumata Director +65 67967226 Fitch Ratings Singapore Pte Ltd 6 Temasek Boulevard #35-05 Suntec Tower Four Singapore 038986 Secondary Analyst Shelley Jang Associate Director +82 2 3278 8370 Committee Chairperson Jeong Min Pak Senior Director +82 23278 8360 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: [email protected]; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: [email protected]. Additional information is available on www.fitchratings.com. The issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure. Applicable criteria, “Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage�, dated 5 August 2013 are available at www.fitchratings.com Applicable Criteria and Related Research: Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=818210 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.