Business / Corporate

Nissan reports 70% profit slump in second quarter and slashes full-year outlook

Reuters, Bloomberg, Staff Report

Nissan Motor Co. reported a 70 percent profit tumble on Tuesday and cut its full-year outlook to an 11-year low as the automaker continued to grapple with falling sales and the aftermath of the ouster of former Chairman Carlos Ghosn.

Operating profit at Japan’s second-biggest automaker by sales came in at ¥30 billion ($274.98 million) during the July-September period versus ¥101.2 billion a year earlier.

That compared with a mean forecast of ¥47.48 billion from nine analyst estimates compiled by Refinitiv and marked its worst second-quarter performance in a decade and a half.

Nissan, whose financial performance has been in the doldrums for nearly two years, cut its forecast for operating profit to ¥150 billion in the year through March 2020, from a previous forecast of ¥230 billion. The new forecast means earnings for the full year will be at their worst in 11 years.

Years of heavy discounting and fleet sales, particularly in the United States, has left Nissan with a cheapened brand image and low vehicle resale value as well as dented profit.

Nissan’s unit sales fell in all major markets, such as Japan, the United States, China and Europe in the April-September period. Globally, the unit sales declined by 6.8 percent to about 2.5 million units.

Another weak quarter from the automaker — hit by Ghosn’s arrest for financial misconduct a year ago and troubles at its North American business — is likely to heap pressure on Nissan’s newly appointed executive team when it takes over on Dec. 1.

Following the ouster of Ghosn — who denies wrongdoing — Nissan has been battered by sliding profit, uncertainty over its future leadership and tensions with top shareholder Renault SA — whose shares fell 2 percent to their lowest since April 2013 after Nissan’s disappointing guidance.

Nissan also withdrew its ¥40 per share dividend outlook, saying that it is now undecided on a payout.

As Nissan’s dividend diminishes, Renault is among those losing the most because it owns 43 percent of its Japanese partner.

The automaker is implementing a global recovery plan under which it will ax nearly one-tenth of its workforce and cut global vehicle production by 10 percent through 2023 to rein in costs which it has said had ballooned when Ghosn was CEO.

Nissan in the past few weeks has announced a revamp of its top ranks with younger executives, naming the head of its China business, 53-year-old Makoto Uchida, as its next chief executive, as it seeks to draw a line under Ghosn’s legacy. He will work alongside new Chief Operating Officer Ashwani Gupta as well as Jun Seki, the new deputy COO.

Uchida, Nissan’s third CEO since 2017, joined Nissan in 2003 from metals and machinery company Nissho Iwai Corp.

Nissan joins Honda Motor Co. and Mazda Motor Corp. in cutting profit and sales outlooks for the year, as they struggle to sell cars in the U.S. and Europe.

Among Japanese carmakers, Toyota Motor Corp. has been the exception, joining Volkswagen AG and Ford Motor Co. in reporting better-than-anticipated results.

Cost controls have helped Toyota maintain profits ahead of projections, even while it invests heavily in an industry undergoing a tectonic shift to electrification and self-driving automobiles.