Nissan Net Income Advances 14% as Forecast Is Maintained

Nissan Motor Co. (7201), Japan’s second-biggest carmaker, reported first-quarter profit that beat analysts’ estimates as a weaker yen boosted earnings in the U.S. and its home country.

Net income rose 14 percent to 82 billion yen ($820 million) in the three months ended June 30, from a revised 72 billion yen a year earlier, the Yokohama, Japan-based company said in a statement today. That beat the 74.9 billion yen average of six analyst estimates compiled by Bloomberg.

Nissan’s deliveries in the U.S. surged 25 percent in May, triple the industrywide increase, after the company cut prices on seven models, including its top-selling Altima sedan. The Japanese automaker has fixed a shortage of supply that hampered sales of five new models in the U.S. last year, the company said last month.

“Nissan’s sales performance in the U.S. has been robust,” said Issei Takahashi, a Tokyo-based auto analyst at Credit Suisse Group AG. “They have cut the retail price of models and the production problem has been solved. These should be the two reasons for the increase in volume.”

Nissan shares fell 0.5 percent to close at 1,112 yen in Tokyo before the earnings announcement. The stock has risen 37 percent this year, compared with the 40 percent gain in the Nikkei 225 Stock Average.

The price cuts and pent-up demand pushed up sales of the new Pathfinder SUV and Altima sedan, the two models Nissan revamped in the U.S. last year. Deliveries of the Pathfinder more than tripled from a year earlier and Altima sales rose 23 percent in June.

Nissan Leaf

Nissan’s operating income in North America rose 34 percent to 41.8 billion yen last quarter, helped by a 20 percent gain in deliveries in the U.S.

The price cuts from Nissan were among the first signs that a Japanese automaker was taking advantage of the weakening yen. The discounting has put the rest of the industry on watch as a test for pricing discipline, John Krafcik, chief executive officer of Hyundai Motor Co.’s U.S. unit, told reporters last month at an awards ceremony in Detroit.

“Nissan has boosted sales through very aggressive price cuts and incentives,” said Ashvin Chotai, London-based managing director of Intelligence Automotive Asia. “The weak yen plays a big role in enabling more competitive pricing, especially on models imported from Japan such as the Rogue. Even models built in the U.S. benefit as they have some import content.”

Weaker Yen

The automaker has projected that a weaker yen will add 225 billion yen to its operating income. Nissan based its forecasts for the current fiscal year on 95 yen to the dollar, while the yen traded at an average of 99 in the April-to-June quarter. Every one-yen decline will boost operating income by about 15 billion yen, the company said in May.

The yen remains “somewhat overvalued,” Joji Tagawa, Nissan corporate vice president, said in a briefing today.

In Japan, operating income more than doubled to 74.8 billion yen in the quarter. Domestic deliveries fell 4.4 percent as Nissan lacked minicar offerings with its own design to compete in Japan, where such sales account for about 40 percent of the new car sales.

To address the gap, Nissan introduced on June 6 its first minicar jointly developed with Mitsubishi Motors Corp. (7211) Nissan sold 12,231 units of the car -- called DAYZ -- last month, making it the fourth bestselling minicar in the month, according to Japan Mini Vehicles Association.

China Slump

Operating income for Asia excluding Japan slumped 52 percent to 7.1 billion yen in the last quarter.

Nissan sales in China fell 15 percent in the January-to-March quarter -- which count toward the fiscal first-quarter tally -- underscoring the lingering consumer backlash toward Japanese products over the disputed islets known as Senkaku in Japanese and Diaoyu in Chinese.

Nissan, which trails only General Motors Co. (GM) and Volkswagen AG (VOW) in sales among global automakers in China, is counting on the revamped Teana sedan -- introduced in late February -- to revive sales in the country. It’s the most profitable of the dozen-plus models the automaker sells in the country, according to Sanford C. Bernstein.

Chief Executive Officer Carlos Ghosn has said that the automaker won’t recoup its market share in China before the last quarter of this year.

To contact the reporter on this story: Ma Jie in Tokyo at jma124@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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