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Wednesday, May 14, 2008
Nissan profit to fall 30% on yen jump, U.S. slump
Nissan Motor Co. on Tuesday forecast a 30 percent decline in profit for the business year to March 2009 due to a stronger yen and weaker demand in the U.S. market.
For last year, Nissan reported a 1.8 percent rise in group operating profit to ¥790.83 billion. Net profit rose 4.7 percent to ¥482.26 billion and sales climbed 3.4 percent to ¥10.82 trillion.
Like many other of the nation's automakers, Nissan said profits were buffeted by a triple shock — the yen's appreciation against the dollar, surging raw materials costs, and the slowing U.S. market — in the January-March quarter, adding that the impact will deepen in the year to next March.
Nissan expects a ¥550 billion group operating profit for this year, a drop of 30.5 percent. It expects net profit to fall by 29.5 percent to ¥340 billion and sales to fall 4.4 percent to ¥10.35 trillion.
"It's going to be a tough year for the whole industry because every single factor is negative," Chief Executive Carlos Ghosn said at a news conference in Tokyo.
The only exception, he said, will be the emerging markets, where growth is continuing in places like India, Brazil, China, Russia and the Middle East.
Nissan joins other automakers who have cast doubt on their prospects for the current business year.
"The trend (in the business environment) has changed since late last year," Toyota Motor Corp. President Katsuaki Watanabe said last week, hinting that harsh conditions will likely prevail for the time being.
The dollar's sharp fall against the yen early this year had a particularly strong impact on automakers. Toyota, vying with GM for the title of world's top automaker, said the total impact of the yen's rise would shave ¥690 billion off its group operating profit this year.
Honda Motor Co., the nation's No. 2 automaker, said the stronger yen would cut ¥303 billion off its group operating profit for the year. Nissan declined to offer a specific figure.
Analysts agree that no perfect solution exits for dealing with a strong yen.
"There is no way to solve the currency factor. As long as Japanese carmakers export vehicles, the currency factor will always affect them," said Atsushi Kawai, a senior analyst at Mizuho Investors Securities Co.
Kawai said Japanese carmakers have dramatically more overseas production compared with 25 years ago, when they were exporting everything directly from Japan.
But the number of vehicles exported is almost unchanged because overall production grew sharply during that time.
Watanabe said last week it will take time to build new assembly plants in the rapidly growing emerging markets.
At the same time, however, the cloudier forecasts will give automakers a good chance to review production costs after a long stint coasting on the yen's prolonged weakness against the dollar, Mizuho's Kawai said.