THE JAPAN NEWS


 

TOKYO (Bloomberg) — Nissan Motor Co.’s efforts to halt declines in key markets are faltering, forcing the automaker to cut its full-year profit outlook a second time and scrap its year-end dividend to investors, including top shareholder and partner Renault SA.

The partners have been dogged by instability in their most senior management ranks over the past 15 months following the arrest of former Chairman Carlos Ghosn. Nissan on Thursday reduced its full-year operating profit forecast to ¥85 billion ($774 million) from an earlier estimate of ¥150 billion, as the manufacturer faces falling sales in the U.S., Japan and Europe.

By slashing its dividend payment to the lowest level since 2011 and pursuing a previously announced plan to cut 12,500 jobs globally, Nissan is trying to free up cash for investment in next-generation technology needed to stay competitive in areas such as electric vehicles and self-driving cars.

“Unfortunately, our business performance has worsened more than we anticipated, and there’s no letting up on investing in the future,” Chief Executive Officer Makoto Uchida said at a press conference at the company’s Yokohama headquarters. “In order to invest in growth, we ended up with this dividend.”

The results and outlook underscore the challenges facing Uchida, who took over as CEO in December and promised to unveil a revised midterm plan in May for Nissan and its two-decade alliance with Renault, which itself recently appointed a new CEO.

Nissan had initially projected an operating profit of ¥230 billion for the fiscal year through March, but trimmed that last quarter. A year ago, it earned ¥318 billion — which at the time marked its lowest annual income in a decade.

Nissan’s total dividend for the current fiscal year is on track to be ¥10 a share, including the prior payout. In November, the Japanese company withdrew its dividend outlook after cutting it in May — the first reduction since it suspended dividends in 2009 amid an industrywide recession.

Executives sought to downplay concern about its negative free cash flow, which ballooned to minus ¥256 billion last quarter compared with minus ¥70 billion a year ago.

Rakesh Kochhar, a senior vice president in charge of global treasury and automotive sales finance operations, told reporters that liquidity isn’t an issue. “If we need to borrow more money we can do so, and at the right time we will also issue financial bonds,” he said, a reference to an issuance originally anticipated last autumn.

For its latest three-month period, Nissan posted an operating profit of ¥23 billion, short of analysts’ average estimate for ¥59 billion. Quarterly sales fell 18% to ¥2.5 trillion, missing analysts’ prediction for ¥2.7 trillion.

“There’s no magic potion,” said Bloomberg Intelligence analyst Tatsuo Yoshida. “They’re going to have to make bold cutbacks in production.”
Revenue and income fell in all of Nissan’s core sales regions, including in China and its home market of Japan. In North America, its largest and most lucrative market, profits fell by more than 25% compared to a year ago to 21.6 billion.

“We know exactly what the problem is,” said Ashwani Gupta, Nissan’s chief operating officer. “We are confident that the U.S. will come back” once eight new models are launched over the next two years, he said.

Worldwide sales volumes at Nissan slid 8.4% to 5.18 million vehicles last year, pulling down its combined performance with Renault to third place globally after top-ranked Volkswagen AG and — for the first time since 2016 — rival Toyota Motor Corp. For the year through March, Nissan cut its automobile sales outlook by 3.6% to 5.05 million units.

The results are beginning to overshadow Nissan’s other big headache, the charges against Ghosn on alleged financial crimes. Sluggish profits, stuck near a decade low, also weaken the company’s position in its three-way carmaking alliance.