Nissan flags drop in profit, with its weakest earnings in 11 years
Nissan forecasts a 28% drop in profit this year due to the Carlos Ghosn scandal continuing to weigh on results, and sluggish US sales
Yokohama — Nissan Motor has forecast a 28% plunge in its annual operating profit, setting it up for the weakest earnings in 11 years and underscoring its struggle to turn the page after the ouster of former chair Carlos Ghosn.
The lacklustre outlook from Japan’s number two automobile maker — hit by Ghosn’s arrest last year and troubles at its North American business — is likely to add to the pressure on CEO Hiroto Saikawa as he tries to overhaul corporate governance and put Nissan on a more equal footing with alliance partner Renault.
Nissan’s weakening profit has raised concerns at Renault, which holds a 43% stake in the Japanese firm and has pushed for closer ties. But some Nissan executives have opposed a full merger and what they see as an unequal partnership that gives smaller Renault more sway over Nissan.
“Today we have hit rock bottom,” Saikawa told a news conference at the company’s headquarters in Yokohama on Tuesday. “We would like to recover to our original performance level in two to three years.”
Nissan expects operating profit of ¥230bn ($2bn) for the year to March 2020, missing the ¥457.7bn average of 23 analyst estimates compiled by Refinitiv.
The car maker reported an operating profit of ¥318bn in the year just ended, down 45% from a year earlier. It also booked ¥4.4bn in expenses to reflect previous misstatements involving Ghosn’s compensation.
Sluggish profitability would likely result in a 30% cut to full-year dividend to ¥40 per share, Nissan said.
The biggest blow to Nissan’s bottom line has come from the costly sales incentives in the US, where its sales fell 9.3% to 1.44-million units in the year ended March 31.
For years it has relied on heavy discounting in its biggest market to sell its Rogue compact SUVs and Altima sedans, under aggressive targets Ghosn set during his time as CEO.
Ghosn, out on bail and awaiting trial in Japan, has been charged on several counts of financial misconduct and of allegedly enriching himself at Nissan’s expense. He has denied all charges and said he is the victim of a boardroom coup.
Earlier in the day, Tokyo prosecutors filed a request to revise their indictment against Ghosn, providing more details on alleged cash transfers involving the former executive and a Saudi friend.
The scandal has rocked the global automotive industry and raised concerns about Nissan’s ability to regain its footing following the departure of the charismatic leader and the architect of its alliance with Renault.
After Ghosn’s ouster as head of the Renault-Nissan alliance this year, the French car maker is set to discuss forming a joint holding company to give both companies equal footing, people with knowledge of the matter have said.
Saikawa, who took over as Nissan’s CEO in 2017, has pledged to focus on improving US profit margins, but it has been a slow process as Nissan continues to resort to discounting.
The car maker also cut its mid-term revenue target to ¥14.5-trillion by 2022, from ¥16.5-trillion. It sees its annual operating margin at 6% by then, compared to an earlier target for 8%. Nissan shares are down about 2% this year, after losing a fifth of their value last year.