China bears the brunt of the criticism because COVID lockdowns there stopped sales and production. Nissan produces and sells a third of its products worldwide in China.
Due to slowing output and declining sales, operating profit fell 14%.
TOKYO – Nissan Motor Co.’s operating profit fell 14% in the most recent quarter as the automaker’s recovery on stronger pricing power was undermined by declining sales and manufacturing bottlenecks.
Nissan had a difficult fiscal first quarter, according to COO Ashwani Gupta, who noted that output was hampered by pandemic lockdowns in China and the global semiconductor scarcity. Nissan, however, continued to stick to its full-year financial targets as it saw conditions improving.
In the months of April through June, operating profit decreased to 64.9 billion yen ($475.9 million), resulting in a 3 percent profit margin. This represents a step back from Nissan’s midterm aim of producing a sustainable 5 percent operating profit margin (down from 3.8 percent a year earlier).
In the three months that ended on June 30, net income dropped by 59 percent to 47.1 billion yen ($345.4 million).
Even though global sales fell 22 percent to 819,000 vehicles over the course of the three-month period as a result of sluggish manufacturing, revenue increased 6.4 percent to 2.01 trillion yen ($14.74 billion).
Sales in North America decreased by 35% to 247,000 vehicles, while deliveries in Europe decreased by 25% to 68,000 vehicles. Nissan’s biggest market, China, saw a volume decline of 15% to 299,000.
The company’s Nissan Next midterm plan has been hampered by the profit decline. The resuscitation plan, presented in 2020 by CEO Makoto Uchida, aims to increase income per vehicle while reducing fixed expenses and production capacity. The campaign ends in the fiscal year that ends on March 31, 2024, but Nissan is in many ways ahead of schedule.
The recent quarter’s operating profit fell mostly as a result of rising transportation and raw material prices, whereas prior-year earnings were bolstered by one-time gains.
Net income decreased when compared to the prior year, when figures were boosted by a windfall from Nissan’s sales of its interests in Daimler, a junior partner in Nissan’s long-standing partnership with French colleague Renault and a German carmaker.
At the same time, profits were helped by a strong foreign exchange tailwind as the Japanese yen fell in value relative to the US dollar. This contributed roughly $188.5 million.
Nissan has been progressively increasing revenue per vehicle sold in recent quarters, mostly by utilizing a slew of updated products, which has helped to reinforce its core profitability.
The current fiscal year, which runs through March 31, 2023, is likely to continue to show improvement, according to Nissan executives. That is due to the fact that the Chinese lockdowns have largely ended and semiconductor supply is increasing.
According to CFO Stephen Ma, the volume recovery “should materialize in the next few months.”
Nissan expects operational profit to rise by a slight 1.1 percent to 250 billion yen ($1.83 billion) for the fiscal year, while net income will fall.
Rising raw material costs, particularly for metals like steel and aluminum, will restrain operating profit. Because of a unique profit from the sale of Daimler, net income is anticipated to decline.
In the current fiscal year, Nissan projects that its worldwide sales would increase by 19% to 10 trillion yen ($73.3 billion). Additionally, a 3.2% increase to 4 million additional vehicles are anticipated in global sales.
Nissan is “cautiously hopeful” despite a 14% decline in operational profit.
The Japanese company’s announcement provides some hope for the auto sector, which has been severely hampered by supply chain disruptions that have complicated carmakers’ production schedules.
According to Nissan Chief Operating Officer Ashanti Gupta, initiatives have been taken to replace custom-made semiconductors with general-purpose chips over the medium term and to secure inventory levels with suppliers in the short term.
The CEO noted that all of Nissan’s Chinese suppliers have resumed operations at full strength.
We are using these challenges as a chance to further refine our business practices, Gupta said.
The business maintained its full-year operating profit target of 250 billion yen ($1.85 billion) for the year ending on March 31 and aimed to sell 4 million devices globally.
At the same time that COVID-19 lockdowns are ending, Gupta emphasized that the chip scarcity “is not gone.”
Nissan blamed a shortage of chips, pandemic precautions in China, and high commodity prices for the first quarter’s operating profit decline of 14% to 64.9 billion yen, while a weaker yen had brought some relief.
Due to limited inventory, the company produced 15% fewer vehicles—812,000—than it had anticipated for the months of April through June, and worldwide retail sales decreased by around 22% from the same time last year.
The primary cause of the operational profit’s decline and subsequent reduction by 50.7 billion yen was the rising cost of raw materials, especially aluminum and steel. Gupta claimed that a sales increase of 53.5 billion yen offset the effects of higher commodity prices.
Nissan’s first quarterly loss in a decade is brought on by weak sales.
Nissan suffered its first quarterly loss since 2010 as a result of lackluster sales, which made the automaker’s issues worse and coincided with ongoing disputes with its former CEO Carlos Ghosn.
The Japanese automaker announced it would not distribute a dividend at the end of its fiscal year and reported a net loss of Y=26.1bn (PS183m) between October and December.
For the fiscal year that ends on March 31, it anticipates profits to plummet to Y=85 billion (PS 596 million), a 43% decrease from the prior year.
The prognosis was downgraded as a result of the financial year’s first nine months’ sharp declines in revenues and operating profitability. Between April and December, revenues decreased by 12.5%, and operating profits fell by 82.7% to Y=54.3 billion.
The company put the dip down to “poor performance and a downturn in total industry volume,” which increased the pressure on Makoto Uchida, its new CEO.
Although sales volumes have been low, we are still making progress, therefore more reorganization is required than originally anticipated, according to Uchida.
Nissan is dealing with a number of issues, including a decline in sales attributed to an aging model selection and aggressive discounting. It must also conserve money while making significant investments in the technologies of driverless and electric vehicles, a challenge faced by all major automakers. The corporation unveiled a plan in July to eliminate 12,500 jobs globally.
Forecasts for this company have not yet taken the effects of the coronavirus outbreak into account. In addition to factory closures in China, Nissan has announced that it will temporarily suspend production at a plant in Kyushu, Japan, due to supply chain stress. Car sales in China are almost guaranteed to decline as a result.
Due to political maneuvering between Nissan and its partners in the largest automaking alliance in the world, France’s Renault and Japan’s Mitsubishi, the firm has been plagued by issues since Ghosn’s departure.
The scandal surrounding Ghosn’s arrest and his dramatic escape, who was the driving force behind the alliance, has diverted attention away from Nissan.
Nissan executives reportedly denounced Ghosn to authorities in November 2018 over claims that he had misrepresented his pay. He avoided a trial, however, by taking a private jet from Tokyo to Lebanon. Since then, he has railed against what he perceives to be injustice, accusing “unscrupulous, vengeful individuals” at the carmaker of plotting to bring him down and equating his situation to the Pearl Harbor attacks.
Nissan is currently suing Ghosn in civil court in an effort to recoup expenses it claims were caused by wrongdoing. Ghosn has refuted every allegation.
Nissan, Honda, and Toyota China’s sales drop lessens in May.
Toyota Motor, Honda Motor, Nissan Motor, and Mazda Motor, the four major Japanese automakers, all had their monthly sales volume in China decline from a year earlier in the fifth month of 2022. Furthermore, Toyota was the only company whose May sales in China increased from April.
Toyota, Honda, and Nissan all had a negative trend in their total China sales volume from January to May, with Nissan reporting the largest year-over-year loss of 26.2%. Toyota maintained its position as the Japanese company selling the most cars, with a total of 704,200 units sold, a 12.3% decrease from the previous year.
Mazda’s year-to-date sales volume was kept a secret in order to protect its April sales numbers. According to information published by the Japanese media site Kyodo, the carmaker sold 8,280 vehicles in May, a decrease of 43.8% from the same month last year.
Toyota sold 148,500 vehicles in China in May alone, significantly improving on the weak April sales with a 33.66% increase month over month. Overall, the figure stayed lower than it was a year earlier.
The manufacturer noted that in addition to the pandemic’s unavoidable impact on manufacturing, poor customer demand also limits retail store sales. Due to the global lack of semiconductor supplies, its high-end imported brand Lexus experienced a 29.9% year-over-year sales fall in China in May.
In terms of Honda, the business sold 89,083 automobiles in China during the last month, which is a decrease of 6.44 percent and 30.8 percent from the same period last year. Dongfeng Honda, for example, witnessed a year-over-year decline of 45.1% with 36,440 vehicles sold last month, while GAC Honda saw a 15.6% decline to 47,124 vehicles in May sales.
The carmaker acknowledged that finding auto parts has been difficult. The two joint ventures’ production schedules had to be adjusted as a result of the inadequate supply of car parts, which had an impact on sales.
In an effort to improve its performance, Honda intends to concentrate on the sales and marketing of its recently announced battery-electric vehicle in the nation.
Nissan’s monthly China sales fell 38% year over year in May to 68,844 vehicles sold. Sales of several Nissan and Venucia-branded cars, however, increased significantly over the same time last year.
Nissan sold 49,875 vehicles in total last month, with the SLYPHY accounting for more than half of those sales with 26,592 units sold, a slight increase of 1.8% from April. The Venucia brand sold 5,609 automobiles in the interim, bringing the total number of vehicles sold in the first five months of this year to 34,639, up 22.7% over the same period last year. However, the models’ contribution to the sales growth did not significantly improve the company’s sales performance.
The Chinese government has announced many strategies to enhance market confidence in order to address the issue, including the policy that reduced the purchase tax on specific car models by half and the “new energy vehicle travelling to the rural” campaign.
The two Japanese automakers, Toyota and Nissan, both had high expectations for the outcomes of the policy, according to Kyodo.
Nissan, a Japanese manufacturer, saw its profit fall in the most recent quarter to less than half of what it had been a year earlier as production was severely hampered by the COVID-19 lockdown in China and a global chip scarcity.
Nissan Motor Co. announced on Thursday that its net profit for the months of April through June came to 47.1 billion yen ($349 million), down from 114.5 billion yen in the corresponding period of 2021. This modification represents a reduction of 59%. Sales during the third quarter increased by 6% to 2.14 trillion yen ($15.9 billion).
According to the manufacturer situated in the port city of Yokohama, rising raw material costs also have a negative impact on profitability.
For the first time in three years, Nissan turned a profit during its most recent fiscal year, which concluded in March.
After Nissan’s star CEO Carlos Ghosn was detained in Japan in 2018 on suspicion of a number of financial wrongdoing allegations, the company’s reputation has suffered. Nissan is partnered with the French company Renault SA.
Ghosn, who oversaw the partnership for two decades, maintains his innocence and blames the allegations on a takeover within the ranks of the automaker. In December 2019, he escaped bail and is currently in Lebanon.
Nissan reiterated in its results report on Thursday that Ghosn misused corporate funds for “personal profit,” including home purchases, family payments, gifts, and inappropriate donations.
Nissan and the entire car industry have suffered as a result of the shortage of semiconductors brought on by COVID-19 restrictions in many countries.
Nissan will invest to “create resilience,” Chief Operating Officer Ashwani Gupta said, revamping supply networks and inventory levels to better meet demand. Gupta cautioned, though, that it would take time for the chips scarcity situation to be resolved.
He noted Nissan was “moving forward with cautious confidence” and added it was also important to handle the rising cost of raw materials.
The inexpensive yen will act as a “tailwind,” according to Gupta. The value of the international profits made by Japanese manufacturers increases when the yen weakens.
Nissan, the manufacturer of the Leaf electric cars, Rogue sport utility vehicles, and Infiniti luxury vehicles, anticipates a recovery in production levels in the coming months.
It projects a net profit of 150 billion yen ($1.1 billion), or 30% less than last year, for the fiscal year that ends in March of the next year.
“The business environment remained more difficult than anticipated in the first quarter. We believe that Nissan’s business basis has been progressively strengthened because of how well we’ve done in this environment “said Makoto Uchida, the chief executive.