Nissan Operating Losses Shrink as Restructuring Takes Hold

(Bloomberg) -- Nissan Motor Co. cut its operating loss outlook for the current fiscal year by about a third, fueling optimism that the automaker is regaining its footing after the coronavirus pandemic dented global sales.

The loss for the year to March will be 340 billion yen ($3.2 billion), compared with the prior forecast for a 470 billion yen operating loss, the Yokohama-based company said in a statement Thursday. For the July-September quarter, Nissan reported an operating loss of 4.8 billion yen, compared with analysts’ average estimate for a 148 billion yen loss.

The shrinking deficits are an early sign that Nissan’s efforts to cut more than 300 billion yen in fixed costs, reduce capacity and restructure the business are paying off. That’s fueling optimism that the automaker will join Toyota Motor Corp. and Honda Motor Co., which recently doubled their full-year profit forecasts, in recovering from outbreak-related disruptions. For Nissan, a recovery in U.S. and China helped to bolster performance, according to Takeshi Miyao, an analyst at Carnorama.

“It’s not that easy to boost sales numbers without incentives, but it appears that the new models are helping to overcome that,” Miyao said. “The main concern now is whether the impact from the coronavirus will derail this trend.”

Shares of Nissan fell 2.9% at the close. The stock is down 36% this year, while the Nasdaq OMX Global Auto Index is up about 33% over the same period.

Sales for the latest quarter fell 27% to 1.9 trillion yen, matching analysts’ prediction. Nissan raised its outlook for full-year revenue to 7.9 trillion, compared with analysts’ average projection for 7.8 trillion yen.

Midterm Plan

Facing an aging lineup and suffering from a volume-focused strategy, Nissan embarked on an aggressive turnaround plan six months ago while moving past the turmoil caused by the November 2018 arrest of former Chairman Carlos Ghosn. The plan calls for the shuttering of three production lines and elimination of about 14,000 jobs globally, up from 12,500 announced a year ago.

Chief Executive Officer Makoto Uchida said in September that he expects Nissan to return to profitability in 2021 if the current momentum continues, thanks to demand in China bouncing back from the pandemic. To further refresh its aging lineup, Nissan is launching 12 new cars in the next 18 months.

It plans to cut both capacity and the number of models by 20%, and will no longer pursue volume growth to shed the old legacy from the Ghosn era. Total vehicle sales for the fiscal year are projected to decline to about 4.2 million units, a drop of 16% from 4.9 million in the prior period.

“The improvement in sales quality and profitability needs to become a more sustainable reality,” said Bloomberg Intelligence analyst Tatsuo Yoshida. “It’s best not to take this for granted, given the competition and coronavirus pandemic.”

Despite the improvement in operating performance, Nissan reduced its full-year net loss forecast by a smaller margin, to 615 billion yen from the previous 670 billion yen, accounting for deep losses posted by alliance partners Renault SA and Mitsubishi Motors Corp.

“While we may have upgraded our outlook, the reality is that we are still looking a lot of red ink,” Uchida said at the earnings presentation. “We need keep on the current track and prove that we can do better.”

In order to bolster funding, Nissan has raised 895 billion yen in funding, issued about 1.1 trillion yen in bonds and had 1.9 trillion yen in unused credit lines, the automaker said.

©2020 Bloomberg L.P.