Nissan shares hammered as profit wiped out by US discounts

Tokyo — Japan’s Nissan Motor slashed its annual outlook on Thursday after deep discounting in the US almost wiped out the carmaker’s first-quarter profit.

The figures confounded the expectations of analysts who saw profit exceeding last year’s, sending Nissan stock plunging 7%.

Investors now have to worry about Nissan’s prospects in the US, a fresh concern for an carmaker already fighting to turn around its fortunes in another critical market, China.

Operating profit for April-June totalled ¥995m ($6.5) versus ¥128.6bn n the same period a year earlier. The result was just a sliver of the ¥164.4bn average of five analyst estimates compiled by LSEG.

“The first quarter was a very tough one for Nissan,” CEO Makoto Uchida told an earnings briefing. “However, we’ll recover our performance by taking clear measures to address the challenges and launching new models.”

The carmaker was “optimising inventory build-up” in the US and would focus on the quality of sales, he said. It planned to bolster sales by offering new and refreshed models such as the Armada and Murano SUVs in the second half of the financial year.

Having endured its worst quarterly performance in over three years, the carmaker cut its operating profit forecast for the financial year by 17% to ¥500bn.

It also cut its retail sales forecast by about 50,000 vehicles to 3.65-million vehicles, citing weaker-than-expected sales in both the US and China.

The US and China are Nissan’s two biggest markets, accounting for half of global sales in the year through March and 51% in the first quarter of this financial year. They are the only two markets where it sold more than 100,000 vehicles in the first quarter. Japan, its home market, is its third-largest market by sales.

While first-quarter sales were even year on year at 787,000 vehicles, profit suffered from deep discounts and increased marketing expenses as Nissan tried to ride out competition and move cars off lots, particularly in the US.

The carmaker’s share price tumbled after the earnings announcement, at one point falling 11% before finishing down 7% at ¥485, its steepest one-day decline since February.

Nissan said US sales were hurt by an ageing portfolio and a market shift to hybrid vehicles. Its struggles in the world’s biggest economy add to woes in China where it has been looking to regain ground amid a price war with local giants.

The Yokohama-based carmaker said last month it halted production at one of eight Chinese factories it operates through a venture with local partner Dongfeng Motor as it seeks to optimise operations.

Reuters