Nissan warns chip shortage will hit profit

Nissan Motor expects flat operating profits this financial year, far below analysts’ expectations, as Japan’s third-biggest carmaker grapples with a global chip shortage, rising material costs and China’s Covid restrictions.

Nissan joins a growing list of global companies warning about worsening earnings as they cannot fully pass on soaring input costs to consumers and are bracing for more supply chain hold-ups with the Ukraine war and China’s long Covid lockdowns.

Nissan’s bigger rival, Toyota, said on Wednesday that “unprecedented” hikes in raw material costs may slice a fifth off annual profit.

Nissan expects sales to rise 18.7% this financial year to ¥10- trillion. But operating profit would edge up only 1% to ¥250bn, below the ¥318.5bn mean estimate from 19 analysts polled by Refinitiv.

“Semiconductor shortage is a new normal, same as pandemic, and we have to live with it because this is not going to finish tomorrow morning,” Nissan COO Ashwani Gupta said in an earnings call.

Nissan said it expected raw material and logistics costs to rise about 1.5 times to ¥212bn in the financial year that started in April, with more than half due to steel and aluminium. It also projected an extra ¥45bn in logistics cost rises  for the year.

The group would respond to price rises by hedging and pre-ordering the materials, said CFO Stephen Ma.

Renault

Nissan CEO Makoto Uchida said the Japanese carmaker supports its alliance partner Renault’s plans to separate its electric vehicle (EV) business, but further discussion is needed to see whether such a move will strengthen their alliance.

The French carmaker said in April that all options are on the table for separating its EV business, including a possible public listing, as it seeks to catch up with rivals such as Tesla and Volkswagen.

But the move has sparked speculation that Renault may consider lowering its stake in Nissan.

Renault owns 43.4% of Nissan, which has a 15% nonvoting stake in the French group. The structure of their partnership has long been a source of friction in Japan.

The 20-year-old alliance, which includes Mitsubishi Motors, was rocked by the 2018 ousting of alliance founder Carlos Ghosn amid a financial scandal. They have since pledged to pool more resources and work more closely together to make electric cars.

Nissan swung to an operating profit of ¥56bn in the fourth quarter, helped by cost cuts and a sliding yen, vs a ¥19bn loss in the previous matching period. 

The result was better than an average ¥38.3bn profit forecast from eight analysts polled by Refinitiv.

Nissan said previously the world semiconductor shortage caused its global production to fall for a fourth financial year running, with the latest setback an 11% drop year on year.

Nissan’s share price was up 1% at close of trade before results were posted, outperforming a 1.8% fall in the broader market.

Reuters