Nissan shrinks annual operating losses and regains its footing
The operating loss for the year to end-March 2021 will be ¥340bn compared with the prior forecast of ¥470bn
Tokyo — Nissan Motor has cut its operating loss outlook for the current fiscal year by about a third, fueling optimism that the carmaker is regaining its footing after the coronavirus pandemic dented global sales.
The loss for the year to end-March 2021 will be ¥340bn ($3.2bn), compared with the prior forecast for a ¥470bn operating loss, the company said in a statement on Thursday. For the July-September quarter, Nissan reported an operating loss of ¥4.8bn, compared with analysts’ average estimate for a ¥148bn loss.
The shrinking deficits are an early sign that Nissan’s efforts to cut more than ¥300bn in fixed costs, reduce capacity and restructure the business are paying off. That’s fueling optimism that the carmaker will join Toyota Motor and Honda Motor, which recently doubled their full-year profit forecasts, in recovering from pandemic-related disruptions.
For Nissan, a recovery in the US and China helped bolster performance, according to Takeshi Miyao, an analyst at Carnorama. “It’s not that easy to boost sales numbers without incentives, but it appears that the new models are helping overcome that,” Miyao said. “The main concern now is whether the impact from the coronavirus will derail this trend.”
Shares of Nissan fell 2.9% at the close. The stock is down 36% for far in 2020, while the Nasdaq OMX Global Auto index is up about 33% over the same period.
Sales for the latest quarter fell 27% to ¥1.9-trillion, matching analysts’ prediction. Nissan raised its outlook for full-year revenue to ¥7.9-trillion, compared with analysts’ average projection for ¥7.8-trillion.
Facing an ageing line-up and suffering from a volume-focused strategy, Nissan embarked on an aggressive turnaround plan six months ago while moving past the turmoil caused by the November 2018 arrest of former chair Carlos Ghosn. The plan calls for the shuttering of three production lines and elimination of about 14,000 jobs globally, up from 12,500 announced a year ago.
CEO Makoto Uchida said in September that he expects Nissan to return to profitability in 2021 if the current momentum continues, thanks to demand in China bouncing back from the pandemic.
To further refresh its ageing line-up, Nissan is launching 12 new cars in the next 18 months. It plans to cut both capacity and the number of models by 20%, and will no longer pursue volume growth to shed the old legacy from the Ghosn era.
Total vehicle sales for the fiscal year are projected to decline to about 4.2-million units, a drop of 16% from 4.9-million in the prior period.
“The improvement in sales quality and profitability needs to become a more sustainable reality,” said Bloomberg Intelligence analyst Tatsuo Yoshida. “It’s best not to take this for granted, given the competition and coronavirus pandemic.”
Despite the improvement in operating performance, Nissan reduced its full-year net loss forecast by a smaller margin, to ¥615bn from the previous ¥670bn, accounting for deep losses posted by alliance partners Renault and Mitsubishi Motors.
“While we may have upgraded our outlook, the reality is that we are still looking at a lot of red ink,” Uchida said at the earnings presentation. “We need to keep on the current track and prove that we can do better.”
To bolster funding, Nissan has raised ¥895bn, issued about ¥1.1-trillion in bonds and has ¥1.9-trillion in unused credit lines, the carmaker said.
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