Nissan Becomes Least Profitable Japan Carmaker Amid Yen Boon

Nissan Motor Co. (7201) became Japan’s least profitable carmaker at a time when the weaker yen is driving up earnings at most of the nation’s exporters.

Net income rose 57 percent to 84.3 billion yen ($825 million) in the three months ended Dec. 31, the Yokohama, Japan-based company reported today. While net beat the average analyst estimate compiled by Bloomberg, it was 3.3 percent of revenue, the lowest margin among any Japanese carmaker last quarter. Operating profit was below analysts’ estimates.

It’s an about-face for Chief Executive Officer Carlos Ghosn, whose company led all Japanese carmakers in profits almost two years ago, when it was faster than its peers in recovering from the natural disasters of 2011, moving production overseas to counter the stronger yen and expanding in emerging markets. Today, Nissan is recovering from production delays, facing slowing emerging markets and missing out on the earnings boon from the weaker yen.

“There’s a sense of crisis in the company and Ghosn has started to address problems,” said Tsuyoshi Mochimaru, an auto analyst at Longine, a Tokyo-based investment analysis firm. “Things will improve, but will take some time.”

Net income in the quarter was 33 percent higher than the average of nine analyst estimates compiled by Bloomberg, while the operating profit of 78.7 billion yen was 29 percent below the average estimate. Nissan also adjusted year-earlier figures to reflect accounting changes.

Photographer: Tomohiro Ohsumi/Bloomberg

Nissan Motor Co. Infiniti branded vehicles bound for shipment sit in a lot at a port in Hitachi City, Ibaraki Prefecture, Japan. Close

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Photographer: Tomohiro Ohsumi/Bloomberg

Nissan Motor Co. Infiniti branded vehicles bound for shipment sit in a lot at a port in Hitachi City, Ibaraki Prefecture, Japan.

Management Overhaul

Nissan advanced 0.1 percent to close at 885 yen in Tokyo trading, before the company reported earnings.

Last year, when the weaker yen was driving up the Nikkei 225 Stock Average to its biggest annual gain since 1972, Nissan shares only rose 9 percent, the worst-performers in Japan’s auto industry after Daihatsu Motor Co. Toyota Motor Corp. surged 60 percent and Honda Motor Co. climbed 38 percent.

Three months ago, Ghosn announced a management overhaul after the company cut its profit forecast by 15 percent. Ghosn, who’s also CEO of Renault SA, axed the chief operating officer role -- the company’s No. 2 position -- among the dozens of executive changes he made. He also reorganized operations to six regions from three, breaking out markets such as China, to enhance execution.

The company in November cut its annual net income forecast by 15 percent, blaming higher-than-expected incentives in the U.S., poor execution and slower growth in emerging countries.

Globally, deliveries rose 3.3 percent in 2013 to a record 5.1 million units. Sales in the U.S., China and Mexico all reached all-time highs, Nissan said last month.

China Sales

In China, where Nissan is the largest Japanese carmaker by volume, deliveries expanded 17 percent to 1.27 million units in 2013, after the company recovered from the consumer backlash triggered a year earlier by a territorial dispute between Asia’s two largest economies.

Industrywide sales in China are projected to expand by as much as 10 percent this year, according to the China Association of Automobile Manufacturers, after the country in 2013 became the first to surpass 20 million units in annual deliveries.

Nissan expects China sales to outpace industrywide growth in 2014, Chief Financial Officer Joseph Peter said in an interview in December.

Like other Japanese carmakers, Nissan remains vulnerable to the geopolitical tensions as illustrated by Prime Minister Shinzo Abe’s December visit to the Yasukuni Shrine, which includes World War II soldiers convicted of Class-A war crimes. In 2012, consumers shunned Japanese products over the islands dispute, sending Nissan sales down that year.

U.S. Incentives

In North America, Nissan earned 3.4 billion yen in operating profit last quarter, down from 26.5 billion a year earlier, as it doled out higher incentives than any Asian automaker.

Still, incentives helped sales. In January, Nissan was among the few automakers that expanded U.S. sales amid the cold weather that contributed to a drop in industrywide deliveries. Nissan sales in the month increased by 12 percent, beating the 10 percent projection by analysts. Market share hit 8.9 percent, up from 7.7 percent a year earlier, according to researcher Autodata.

New Models

The Japanese carmaker is banking on the remodeled Rogue small sport utility vehicle to get a bigger share of the growing crossover market.

Nissan’s volume growth in the U.S. is partly helped by aggressive pricing. The carmaker in May cut sticker prices for seven major models, including the Altima sedan, boosting sales in that month by 25 percent.

“Nissan should continue to suffer from the harsh pricing environment in the U.S.,” said Kota Yuzawa, an auto analyst at Goldman Sachs Group Inc. in Tokyo. “I’m really worried about their U.S. pricing, especially because in the next 12 months they won’t have major new product launches except for the Murano.”

In Japan, operating income quintupled to 87 billion yen in the quarter, thanks to a weaker yen which boosted the value of Infiniti Q50 sedans and Rogue SUVs exported out of Japan.

Weaker Yen

Still, Nissan hasn’t benefited from the weakening yen as much as Toyota, (7203) Fuji Heavy or Mazda Motor Corp., as it moved the majority of production overseas. The carmaker produced 23 percent of its vehicles in Japan last year, the lowest ratio among Japanese automakers after Honda.

The yen last year fell against every major currency except for the South African rand. That’s helped Toyota forecast record profit and fueled a rally in Japanese stocks. It recently traded at 102 versus the dollar.

Besides the yen boost, Nissan’s domestic deliveries increased 2.9 percent in 2013, as it introduced in June a minicar jointly developed with Mitsubishi Motors Corp. (7211) to compete in the biggest segment of Japan’s car market.

In Asian markets outside Japan, operating profit climbed 50 percent to 14.6 billion yen and the loss in Europe widened to 7.3 billion yen, versus about 300 million yen a year earlier.

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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