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Nissan Gains a Step on Japanese Rivals

February 8, 2012
4 min to read


YOKOHAMA — Nissan Motor Co. on Wednesday posted a higher profit for the three months ended in December and reaffirmed its full-year estimate, a bullish performance that positions the company as the most profitable of Japan's three major auto makers.


Company President and Chief Executive Carlos Ghosn said in a written statement he is "confident that Nissan will deliver the full-year profitability targets" despite the yen's recent rise to record levels against the dollar, as well as natural disasters in Japan and Thailand that limited production, reported The Wall Street Journal.

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Nissan said its net income rose 3.2 percent to ¥82.67 billion ($1.08 billion) in the October-December quarter, from ¥80.07 billion a year earlier, due to operating-profit gains in Asia from sales of models such as the company's Leaf electric car in Japan and Teana sedan in China.


Japan's No. 2 car maker by volume also kept intact its ¥290 billion net-profit forecast for the fiscal year ending in March, well above the projections from Toyota Motor Corp. and Honda Motor Co.


The bullish tone sets Nissan apart from domestic rivals Toyota and Honda, both of which posted lower net earnings in the latest quarter. Toyota on Tuesday forecast a ¥200 billion net profit for the full year and Honda last week predicted ¥215 billion in earnings for the year.


Nissan's latest quarterly results also beat a mean estimate of ¥72.54 billion in a survey of seven analysts compiled by Thomson Reuters.


Yet Nissan officials signaled concern about the yen's rise—which dents the company's operating profit by ¥20 billion annually for every ¥1 appreciation against the dollar—and the potential negative impact of the crisis surrounding the euro. A stronger Japanese currency makes vehicles built in Japan less price-competitive abroad and erodes the yen value of repatriated profits.

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"One reason we didn't change our full-year forecast is due to the possibility problems in Europe could have a big impact on the fourth quarter and beyond," Nissan Corporate Vice President Joji Tagawa said at a news conference. "There's still a lot of uncertainty," he said.


In the latest quarterly results, Nissan's dollar- and euro-based operations did act as a drag on the bottom line. The auto maker posted a 10 percent year-to-year drop in operating profit in North America and a loss of ¥1.4 billion in Europe. However, that was offset by a 16-fold profit increase in Japan and a 2.4 percent gain in the rest of Asia.


The surge in Japanese earnings for the October-December quarter came after an industrywide plunge in demand in the year-earlier period stemming from a phaseout of environmental car subsidies.


To cope with the yen's appreciation, Nissan has shifted more production overseas and increased the use of imported parts in its home market. As part of that effort, the company wants to move up its current business plan's timetable for boosting imported components in Japanese-made cars from an average of about 20 percent in 2009 to at least 40 percent by 2013.


"In the plan, we said use of imports would be increased to 40 percent or more...and although I can't say exactly where we are now, considering the extent of the yen's rise, we are looking into ways to speed that up," Mr. Tagawa said.

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For the full year, Nissan maintained an earlier estimate for sales of ¥9.45 trillion—the company's highest sales level since the ¥10.8 trillion it posted in the fiscal year ended in March 2008—and an operating profit of ¥510 billion.


That would make Nissan the most profitable of Japan's three largest auto makers, with an operating-profit margin of 5.4 percent for this fiscal year, higher than Honda's 2.5 percent and Toyota's 1.5 percent forecast for the same period. Nissan is targeting an operating-profit margin of 8 percent and a global market of share of 8 percent under its six-year business plan.


Still, Toyota and Honda are trying to regain momentum with normalized output after last year's earthquake and tsunami in Japan and flooding in Thailand, scrambling to lift production to meet backlogs.


In the quarter ended in December, Nissan's operating profit rose 3.6 percent to ¥118.08 billion. Its sales rose 11 percent to ¥2.331 trillion in the quarter.

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