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Nissan Predicts Sales Will Climb, Profits Stay Flat as Costs Rise

Nissan projects sales will climb some 18.7% in this fiscal year, but operating profit will remain flat as higher costs erode margins.


Nissan projects strong sales growth of over 18% in fiscal year, but profits to remain flat as higher operating costs erode margins.
Nissan says chip shortages are "the new normal."

Nissan Motor Co says it expects sales to climb over 18% in the current fiscal year – but that operating profit will remain flat at 1% as chip shortages and other challenges erode profitability. The projection comes in well short of analyst expectations, with Japan’s third-largest carmaker hammered by chip shortages, higher materials costs and ongoing Covid restrictions in China.

Nissan is not alone in projecting lower margins as costs rise but economic conditions make it difficult to pass those costs on to the consumer.

Toyota Motor also recently announced higher raw material costs could slice a fifth off its full-year profit.

The “uncertain situation” around the supply chain – including the China lockdown – is the biggest risk on the horizon, Nissan CEO Makoto Uchida said.

Nissan expects sales to rise by 18.7% in the current financial year to 10 trillion yen ($77.6 billion), but operating profit to grow just 1% to 250 billion yen, well short of the 318.5 billion yen ($2.5 billion) mean estimate from 19 analysts polled by Refinitiv.

“Semiconductor shortage is a new normal, same as pandemic, and we have to live with it because this is not going to finish tomorrow morning,” Nissan Chief Operating Officer Ashwani Gupta told an earnings briefing.

Nissan said it expected raw material and logistics costs to increase by about 1.5 times to 212 billion yen in the fiscal year that started in April, with more than half due to steel and aluminium price rises. It also projected an additional 45 billion yen in logistics cost increases for the current year.

Uchida told the earnings briefing the Japanese automaker supports its partner company Renault’s plans to separate its electric vehicle (EV) business. Renault owns 43.4% of Nissan, which in turn has a 15% non-voting stake in the French company. The structure of the partnership has long been a source of friction in Japan.

See also: Renault, Nissan and Mitsubishi Pledge to Deepen EV Tie-Up

The French carmaker said in April all options were on the table for separating its EV business, including a possible public listing, as it seeks to catch up with rivals such as Tesla and Volkswagen. But the move has raised speculation that Renault may consider lowering its stake in Nissan.

The car makers’ two-decade-old alliance, which includes Mitsubishi Motors, was rocked by the 2018 ouster of alliance founder Carlos Ghosn amid a financial scandal. They have since pledged to pool more resources and work more closely together to make electric cars.

Nissan swung to an operating profit of 56 billion yen in the fourth quarter, helped by cost cuts and a sliding yen, versus a 19 billion yen loss in the same period a year earlier.

The result was better than an average 38.3 billion yen profit forecast from eight analysts polled by Refinitiv.

Nissan said previously the world semiconductor shortage caused its global production to fall for a fourth consecutive business year, with the latest decline being a 11% drop year on year.

  • Reuters, with reporting by Neal McGrath

 

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Nissan Said to Plan Battery Recycling Units in US, Europe

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Neal McGrath

Neal McGrath is a New York-based financial journalist. Neal started his career covering the Asia-Pacific region for the Economist Intelligence Unit, then joined Asian Business magazine. He's subsequently held a variety of editorial positions covering business, economics, finance and sustainability. Neal has lived and worked in Hong Kong, Singapore, Germany and the US.

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