Nissan Ekes Out Profit as Sales Show First Sign of Recovery

(Bloomberg) -- Nissan Motor Co. trimmed its loss outlook for the fiscal year and posted a surprise operating profit for the most recent quarter, a sign the beleaguered automaker is beginning to recover from the worst of the pandemic’s impact on its already depressed sales.

Japan’s second-largest carmaker forecast a net loss of 530 billion yen ($5.1 billion) for the year through March, narrower than the previously expected 615 billion yen. Nissan posted an operating profit of 27.1 billion yen for the three months through December. Analysts had on average predicted a 46.8 billion yen loss.

Last quarter saw a recovery for the global auto market as a whole, with retail sales hitting the previous year’s levels in the U.S. and exceeding them in China, Nissan Chief Operating Officer Ashwani Gupta said at a briefing Tuesday. “We are gaining momentum,” he said.

Nissan is about nine months into an aggressive turnaround plan that involves slashing its global production capacity by around a fifth and churning out 12 new models in the 18 months through November to refresh its aging lineup and rouse stagnating consumer interest.

Sales of new models like the Rogue SUV, which debuted in the U.S. in October, have been charting higher, limiting the drop in Nissan’s overall global sales to less than 10% year-on-year in November and December, compared with a more than 30% decline in the first half of 2020.

“These new models will be key” for the automaker, said Bloomberg Intelligence analyst Tatsuo Yoshida. “Nissan should pick up a bit because of the new products coming out in markets like the U.S., but right now things are still dire.”

Sales for the quarter through December fell 11% to 2.2 trillion yen, Nissan said in its earnings statement Tuesday. For the full year, Nissan is forecasting sales of 7.7 trillion yen, slightly shy of the 7.8 trillion yen analysts expect.

Global auto sales are forecast to recover steadily this year to 84.4 million units from 76.8 million vehicles in 2020, IHS Markit data show. Challenges remain, not least the shortage of semiconductors that’s causing automakers worldwide to trim their output.

Nissan has set a global full-year sales target of around 4 million units, a little down on previous expectations for 4.2 million cars, as the company forecasts lingering coronavirus-related disruptions and an inability to produce to demand due to the chip shortage.

Analysts at Mitsubishi UFJ Morgan Stanley Securities estimate the chip crunch will knock 500,000 units off Japanese automakers’ vehicle production. Though Honda Motor Co., which also reported earnings Tuesday, is projected to bear the brunt of that, Nissan confirmed last month that it’s cutting production at one of its plants in Japan, part of a reduction in output that may exceed 10,000 vehicles through March, according to local media reports. Nissan is also suspending some truck production in Mississippi due to the chip shortage, a spokeswoman said last week.

Any share-price correction caused by chip-related output disruptions could range from 10% to as much as 30%, Jefferies analysts Takaki Nakanishi and Lilin Zheng wrote in a report last month. Jefferies rates Nissan stock a hold, arguing the company’s ability to stabilize management and concentrate on structural reforms still needs proving.

Nissan shares, which dropped 12% in 2020, have recovered this year. They were little changed Tuesday.

In September, Chief Executive Officer Makoto Uchida said he expected the company to return to profitability in 2021 if momentum kept up in markets like China, where Nissan also plans to expand, he said.

“We recognize we are still in the negative,” Uchida said Tuesday. “We’re realistic and aware of foreseeable risks, but we’re determined to successfully execute Nissan’s business transformation plan.”

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