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Nissan cuts FY 2017 operating profit outlook after scandal, but expects record high net profit due to U.S. tax reform

Kyodo

Nissan Motor Co. has downgraded its group operating profit outlook for the year through March due to an inspection scandal, while raising its net profit projection to a record high following the U.S. tax overhaul.

The Japanese automaker slashed its group operating profit outlook for fiscal 2017 to ¥565 billion ($5.1 billion) from its previous forecast of ¥645 billion.

In November, Nissan had downgraded its group operating profit estimate due to costs related to a data inspection scandal in which uncertified workers were carrying out final car checks in violation of regulations. The company was forced to recall 1.2 million vehicles in the domestic market.

The automaker said Thursday that costs related to the scandal are expected to dent its profit by some ¥90 billion in the current business year.

“We’ve been facing many challenges … but will continue to improve our finances. We’ll normalize our operations by the end of the fiscal year,” Joji Tagawa, corporate vice president, said at a news conference at the company’s headquarters in Yokohama.

Nissan said its domestic orders fell by 10 to 20 percent in the October to December period but those in January gained from a year before. But it trimmed its global sales target for the full year to 5.78 million vehicles from 5.83 million.

Meanwhile, Nissan raised its group net profit outlook to a record ¥705 billion from its earlier estimate of ¥535 billion, as U.S. President Donald Trump’s tax reforms, signed last December, reduced its tax burden by ¥207.7 billion in the nine months through December.

But Tagawa said the upward revision came from a “one-time boost,” adding, “I’m not going to say (the results) are great. We had to slash our operating profit and our global sales and we take it seriously.”

The latest operating and net profit outlooks represent a drop of 23.9 percent and growth of 6.3 percent, respectively, from the previous business year. Sales projections were left unchanged at ¥11.8 trillion, up 0.7 percent from the previous year.

In the April to December period, Nissan said its group net profit rose 39.6 percent from a year earlier to ¥578.14 billion. Consolidated operating profit declined 27.6 percent to ¥364.24 billion, impacted by costs related to its inspection scandal and a slowdown in its key U.S. market.

Sales rose 3.2 percent to ¥8.53 trillion.

For the nine-month period, Nissan sold 4.11 million vehicles, marking a 2.9 percent rise from a year earlier.

By region, domestic sales rose 9.7 percent to 378,000 vehicles despite the inspection scandal as a sharp rise in demand for minicars more than offset a 3.4 percent fall in auto sales from a year earlier to 252,000 units.

The automaker sold 1.56 million vehicles in North America, down 1.4 percent. Sales in the United States, its biggest market, rose 1.1 percent to 1.18 million units on the popularity of its Rogue and Rogue sport vehicles. Sales in Europe were up 0.3 percent to 544,000 units.

In China, Nissan sold 1.02 million vehicles in the January to September period, up 9.8 percent from a year before.