Nissan forecasts return to profit for first time in 3 years

Nissan Motor Co Ltd updates

Nissan has projected a return to profitability for the first time in three years despite a big hit from the global semiconductor shortage.

Wednesday’s upward revision in guidance from Japan’s third-largest carmaker came amid continuing chip bottlenecks, rising raw material costs and a rise in Covid-19 cases in south-east Asia.

For the fiscal year ending in March 2022, Nissan said it now expected a net profit of ¥60bn ($546m) compared with an earlier forecast for a loss of ¥60bn. That was still below analysts’ forecasts for a ¥78bn profit, according to S&P Global Market Intelligence.

Nissan, which has an alliance with France’s Renault and Japan’s Mitsubishi Motors, had struggled with heavy losses since the 2018 ousting of its former chair Carlos Ghosn. But its turnround efforts are finally bearing fruit as the company abandoned an aggressive expansion policy to improve its profit margins.

“We are determined to continue this momentum with cautious optimism,” said Ashwani Gupta, Nissan’s chief operating officer.

The company maintained its May forecast that it would lose about 500,000 units of production during the current financial year due to the global semiconductor shortage although it still expects to recover half of that during the October to March period.

“Needless to say, our inventories have decreased so we need to manage this smartly,” said chief executive Makoto Uchida.

Still, the financial year was off to a solid start with vehicle sales rising roughly 70 per cent in the US and China during the April to June quarter compared with a year earlier. Quarterly net profit rebounded to ¥114.5bn from a loss of ¥285.6bn while revenue rose 71 per cent to ¥2tn. Operating profit margin also improved to 3.8 per cent, from minus 13 per cent.

Koji Endo, head of equity research at SBI Securities, said the recovery during the three-month period was stronger than expected. “But since the operating profit forecast for the full year is just double what was registered during the fiscal first quarter, we can see that the company is expecting a large impact from the chip shortage in the months ahead,” he added.

Earlier this month, Jaguar Land Rover halved sales expectations after warning that the impact of the global chip shortage was significantly worse than expected.

The shortage was initially caused by an unexpected post-Covid rebound in demand for cars late last year, which coincided with a booming consumer electronics market.

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