Nissan Raises Profit Outlook on High Car Prices, Weaker Yen

(Bloomberg) -- Nissan Motor Co. upgraded its annual profit outlook as strong demand and rising car prices help offset chip shortage-related production losses. 

The Japanese automaker raised its forecast to an operating profit of 210 billion yen ($1.8 billion) for the fiscal year ending March 31, up from 180 billion yen announced in November and exceeding analysts’ average projection for 202 billion yen. For the October-December quarter, profit topped their prediction at 52 billion yen.

The brighter forecast highlights how robust demand and sky-high car prices are bolstering automakers’ profitability across the board. Those factors are also a tailwind for the Japanese automaker’s revival strategy which targets new model rollouts and reducing incentives to boost margins.

Nissan’s performance in the latest quarter was better than anticipated despite Covid and supply issues, Chief Operating Officer Ashwani Gupta said in a online briefing Tuesday. The company moved to upgrade its profit forecast for the year due to favorable exchange rates and profit margins on cars, in addition to lower-than-expected raw material prices and progress the company’s made with cutting costs, he said.

Net revenue per unit brought in by models such as the Rogue SUV in the U.S. increased by double digits in the recently-ended quarter from a year earlier, Gupta said. Demand is strong, he said, adding the important factor going forward is how many cars Nissan can produce. “The more semiconductors we get, more and more we can grow,” he said.

Nissan took heavy hits to production in the latest quarter, with global output declining 22% from a year earlier. Unit sales also dipped, falling 18% from a year ago, when the market was surging back from the first wave of pandemic lockdowns. Even so, the automaker kept its forecast to sell 3.8 million vehicles for the current fiscal year. 

“We are confident we’ll hit 3.8 million retail sales,” Gupta said, adding though that the situation surrounding chips and the spread of the omicron variant needs to be continuously monitored on a daily basis going forward.

In the near-term, depressed output hinders Nissan’s ability to capitalize on demand for cars, which has recovered swiftly this year in major markets such as the U.S. In the longer term, if the chip shortage and other pandemic-related disruptions drag on, this could push back Nissan’s broader recovery.

Bloomberg Intelligence anticipates Nissan’s full-fledged recovery to be delayed to the first quarter of next fiscal year beginning April — a point at which production is forecast to normalize.

Chief Executive Officer Makoto Uchida said in an interview with Bloomberg Television last month that while the chip shortage situation remains uncertain, Nissan’s production is “on a recovery track.” In the months ahead, Covid continues to present a major threat, but “we are expecting the market to recover overall,” Uchida said. 

“When you look at factors of revenue and profit-generation, Nissan is improving, or at least heading in the right direction,” said Satoru Aoyama, a senior director at Fitch Ratings, adding though that the fruits of those efforts are not fully revealed quite yet in consolidated results.

Nissan shares fell 1% on Tuesday ahead of the results. The stock is up 6.7% this year, after falling each of the past six years.

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