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MarketScreener Homepage  >  Equities  >  Tokyo  >  Nissan Motor Co Ltd    7201   JP3672400003

NISSAN MOTOR CO LTD

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Rough ride: Nissan slashes outlook, unveils Ghosn-related charge

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02/12/2019 | 07:48am EST
The logo of Nissan Motor Co. is seen at its show room behind a traffic sign in Tokyo

YOKOHAMA, Japan (Reuters) - Nissan Motor warned its annual profit will plumb six-year lows on waning global sales, underlining the challenges it faces as it also grapples with the fallout from the shocking arrest and ouster of its former chairman Carlos Ghosn.

The Japanese automaker, in its first results since Ghosn was detained in November, unveiled an $84 million charge linked to deferred compensation for the executive who has been indicted for under-reporting his salary at Nissan over 2010-2018.

The scandal has roiled global auto markets and created tensions between Nissan and its automaking partner France's Renault, raising concerns about the future of the companies that Ghosn wanted to integrate.

The dour outlook indicates an urgent need for Nissan and Renault to strengthen their partnership, but ties have been strained since the Japanese automaker moved first to remove Ghosn as chairman after his Nov. 19 arrest in Tokyo.

Nissan wants to stabilize alliance operations, said CEO Hiroto Saikawa, who is scheduled to meet newly appointed Renault Chairman Jean-Dominique Senard this week in Japan as they look at ways to cement their partnership.

Ahead of that meeting, the Nissan CEO said he wanted both companies to better leverage their scale to be more competitive and efficient in areas including manufacturing and procurement, while respecting each others' autonomy.

"In the past few years there's been a lot of talk about 'convergence' of the two companies' operations," Saikawa said, referring to one of Ghosn's key aims for the alliance. "While stabilizing our operations, we need to re-examine whether investments (towards convergence) are the most efficient."

This could mean a reassessment of the alliance's growth targets through 2022, Saikawa said at a briefing on Tuesday.

Nissan, which is almost 60 percent bigger than Renault by sales, remains junior in their shareholding structure. Renault holds 43.4 percent of Nissan, whereas Nissan has just a 15-percent non-voting stake in Renault.

Japan's second-biggest automaker projected an operating profit of 450 billion yen ($4 billion) for the year to March, down 22 percent from the previous year and 17 percent below an earlier forecast, hurt by a slowdown in global sales.

This would be Nissan's lowest operating profit since 2013.

(For an interactive chart on N
issan's operating profit, vehicle sales, click on https://tmsnrt.rs/2POSji4

SALES TO SKID

Nissan cut its annual global retail vehicle sales view by 5.5 percent and projected weaker sales in China, its biggest market, and the United States.

Saikawa said Nissan will avoid trying to meet sales targets by using discounts, a strategy which has hurt its profitability in North America, the world's No. 2 auto market.

"We were only able to meet 60 percent to 70 percent of our (global) target for the year to the third quarter," Saikawa said. "If we are not careful about how we make up for that shortfall in the fourth quarter we could find ourselves in similar situations we've seen in the past."

"So we want to raise our performance by improving the quality of sales," he added.

Nissan expects to sell 5.6 million vehicles worldwide in the year to March, versus a previous target for 5.93 million.

While it still sees sales growing in China, the world's top auto market, it trimmed its forecast for the country to 1.56 million units from 1.70 million units.

In the United States, it now sees sales tumbling 8.6 percent on the year to 1.46 million units, from 1.55 million last year.

(For an interactive chart on Japanese
automakers' vehicle sales in the U.S., China, see https://tmsnrt.rs/2RjnBuA

Nissan and its domestic rivals, including Toyota Motor Corp, have struggled with sluggish sales and falling profit in North America. Their margins have been squeezed as they resorted to steep discounts to drive up demand in a competitive U.S. market where sales have plateaued near record highs.

While it has been able to repair some of its profits in North America as inventory reduction of older models enabled it to dial back on heavy U.S. discounting, falling demand will test Nissan's ability to be disciplined with its incentives.

(For an interactive chart on Japa
nese automakers' annual global vehicle sales, see https://tmsnrt.rs/2RnFOr2

GHOSN SALARY PROVISION

The bleak outlook comes as Nissan also grapples with the Ghosn scandal and the resulting scrutiny of its corporate governance.

Nissan said it had recognized around 9 billion yen ($84 million) in additional expenses linked to payments to Ghosn. This announcement comes after it was indicted alongside Ghosn with failing to disclose the compensation.

While it is possible that a Japanese court could order Nissan to pay Ghosn that amount, Saikawa said it was "unlikely" the expense would be realized.

This provision refers roughly to the amount Ghosn has been charged of under-reporting in his 2010-2018 salary at Nissan.

Ghosn has denied all charges against him.

(Reporting by Naomi Tajitsu; Editing by Himani Sarkar)

By Naomi Tajitsu

Stocks mentioned in the article
ChangeLast1st jan.
MITSUBISHI MOTORS CORPORATION -1.25% 630 End-of-day quote.10.14%
NISSAN MOTOR CO LTD -0.95% 935 End-of-day quote.9.22%
RENAULT -1.56% 58.74 Real-time Quote.9.31%
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Financials (JPY)
Sales 2019 11 768 B
EBIT 2019 -
Net income 2019 511 B
Debt 2019 6 545 B
Yield 2019 6,07%
P/E ratio 2019 7,10
P/E ratio 2020 6,60
EV / Sales 2019 0,89x
EV / Sales 2020 0,87x
Capitalization 3 946 B
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Mean consensus HOLD
Number of Analysts 20
Average target price 1 033  JPY
Spread / Average Target 10%
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Managers
NameTitle
Hiroto Saikawa Vice Chairman, President & Chief Executive Officer
Hiroshi Karube Chief Financial Officer
Takao Asami Senior Managing Executive Officer & Head-Research
Anthony Thomas Chief Information Officer & Corporate VP
Carlos Ghosn Bichara Director
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