Nissan Lifts Profit Guidance on Forex Windfalls, Cost Cuts
BY :CHANG-RAN KIM
FEBRUARY 09, 2015
Yokohama. Nissan Motor lifted its annual earnings forecast on Monday, expecting its highest operating profit in seven years due to favorable currency movement and further cost cuts.
Japan's number-two carmaker by sales also lowered its global sales forecast by 150,000 vehicles to 5.3 million, expecting weaker sales particularly in China and Russia due to weaker-than-expected overall demand in those markets.
Nissan raised its operating profit projection to 570 billion yen ($4.79 billion) for the year to end-March from the previously forecast 535 billion yen. A poll of 29 analysts by Thomson Reuters puts the profit at 589.9 billion yen.
For October-December, operating profit nearly doubled to 156.0 billion yen, eclipsing the 121.42 billion yen estimate of 12 analysts. Growth was helped by a low base of comparison from the year-earlier quarter, when earnings were pushed down by increased marketing and other spending.
Nissan changed its dollar rate assumption to 108.8 yen for the year from 104 yen, lifting the value of revenue made in the United States, its biggest market.
"We anticipate good full-year results as our product offensive and positive momentum in North America and Western Europe offsets volatility in other markets," chief executive Carlos Ghosn said in a statement.
However, strong sales growth in the United States was achieved partly by offering consumers incentives well above the industry average.
In the third quarter, discounts cost Nissan around $3,500 per vehicle, according to researcher Autodata.
"Our profitability in the United States still lags competitors," corporate vice president Joji Tagawa said. "This year, we'll aim to improve this by controlling costs and incentives more, as well as improving product pricing."
The launch of bigger, higher-margin vehicles should also help, he said.
Nissan has said improving profitability is its top near-term priority, with a target of 8 percent operating margin by the year to March 2017.
So far this year, its margin was 5.9 percent under its own calculation that includes Chinese profits under previous accounting standards.
For the third quarter only, Nissan reported a 5.3 percent margin, far short of compatriot Toyota Motor's 10.6 percent.