Business / Corporate

Nissan sees sharp sales and profit drop as business struggles

Bloomberg

Nissan Motor Co. is forecasting a wider-than-projected operating loss for the current fiscal year, as the impact from the coronavirus pandemic forces the automaker to accelerate cost-cutting measures.

The operating loss for the year to March will be ¥470 billion ($4.5 billion), compared with analysts’ average prediction for a ¥216 billion loss and a ¥40.5 billion loss in the prior year. The Yokohama-based company also plans to skip its dividend, it said in a statement Tuesday.

The carmaker is struggling to restore profitability and sales after reporting its biggest loss in two decades. Nissan has been mired in turmoil since the 2018 arrest of former Chairman Carlos Ghosn, who had pushed for volume growth. The company is seeking to revive an aging lineup and cut costs in an effort to improve margins and bring more cash into operations.

"It’s going to be a very challenging year,” Makoto Uchida, Nissan’s chief executive offficer, said at a news conference.

Nissan shares are down 35 percent this year, compared with a 14 percent decline in Toyota Motor Corp.’s stock and Honda Motor Co.’s 13 percent decline.

Nissan reported a ¥154 billion operating loss for the April-June quarter, compared with analysts’ prediction for a loss of ¥253 billion, as the automaker stepped up cost cuts to make it through a pandemic-induced drop in sales. Revenue fell 51 percent to ¥1.17 trillion in the April-June quarter, when most major economies went into lockdown to slow the spread of the COVID-19 virus.

The halt in dividend payouts is a blow to Renault SA, the Japanese carmaker’s biggest shareholder with a 43 percent stake and its partner in a global automaking alliance. Nissan’s performance during the latest quarter will reduce Renault’s net income by €1.2 billion, the automaker said in a statement. Renault is set to announced results Wednesday.

Nissan will shut three production lines and cut about 14,000 jobs globally, up from 12,500 announced a year ago. It will also close two rented offices near Nissan’s headquarters in Yokohama due to the pandemic, a person with knowledge of the matter has said. Nissan expects to sell 4.13 million vehicles during the current fiscal year, compared with 4.93 million units in the prior period.

Mitsubishi Motors Corp., which partners with Nissan and Renault SA, predicted a bigger-than-estimated full-year loss Monday, and announced plans to end production of its Pajero SUV by shutting down a plant in Gifu prefecture.

"It would be meaningless if the cuts are only effective in the short term,” said Bloomberg Intelligence analyst Tatsuo Yoshida. "I’m interested in how sustainable and meaningful the cost cuts are.”

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