TOKYO – Nissan, struggling with sluggish sales and slow business in China, slashed its full-year earnings outlook on Friday, saying profit, sales and revenue would all miss its earlier targets.
CEO Makoto Uchida, who just unveiled a new mid-term plan focused on shoring up profitability, said the slipping volume and “cost relief” for suppliers undermined Nissan’s business trajectory.
“Were we overoptimistic?” Uchida said during a snap news conference to explain the Japanese automaker’s latest sales downgrade. “Yes, it’s true we did not reach what we anticipated.”
In plotting Nissan’s new three-year midterm plan, which is called The Arc and was unveiled late last month, product planners realized some of the company’s sales goals were a bit too rosy.
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Not only does that mean sales are down from expectations, it means Nissan will compensate suppliers who built their own business plans around forecasts for more robust volumes.
“We charted sales plans for each model and found out some models have difficulty reaching sales expectations,” Uchida said of the company’s profit warning.
“Suppliers have been making investments based on the assumptions we gave, and the volume decline is our fault. So, to reduce this burden on suppliers, we are making an additional booking.”
Uchida cut Nissan’s global sales expectation to 3.44 million vehicles for the just-ended fiscal year that finished March 31, from Nissan’s earlier target of 3.55 million.
The new goal represents a moderate 4.1 percent increase over the 3.31 million vehicles Nissan sold in the previous fiscal year that ended March 31, 2023.
The adjustment marks Nissan’s second sales downgrade of the fiscal year. Nissan had earlier expected worldwide sales would register 3.7 million vehicles, before trimming it to 3.55 million.
Under The Arc plan unveiled March 25, Nissan wants to lift annual global sales by 1 million vehicles by the fiscal year ending March 31, 2027.
When The Arc was announced, the goal implied worldwide sales of around 4.7 million in three years’ time, a goal that is still below the target set out by Uchida nearly three years ago. Nissan’s global sales have steadily fallen from 5.52 million in the fiscal year ended March 2019.
Uchida’s original comeback plan had the company achieving global operating profit margin of 5 percent and global sales of 5.38 million vehicles in the fiscal year ended March 31, 2024.
Instead, Nissan now expects margin of 4.2 percent and sales of 3.31 million.
Sliding sales will dent revenue. Nissan scaled back its revenue outlook to 12.6 trillion yen ($81.59 billion) from 13.00 trillion yen ($84.18 billion). But the new guidances still represents a 22 percent increase over the result from the fiscal year ended March 31, 2023.
The company is expected to announce finalized fiscal-year earnings in May.
Operating profit will take a 30 billion yen ($193.3 million) hit thanks to the negative impact of lower sales and foreign exchange rates. Meanwhile the cost relief offered to suppliers, along with other “accelerated investments,” will lop off another 60 billion yen ($388.5 million).
Nissan now expects operating profit of 530.00 billion yen ($3.43 billion) for the fiscal year.
That is down from its earlier forecast for operating profit of 620.0 billion yen ($4.01 billion), but still represents a 40.5 percent increase over the previous fiscal year.
Net is also down. Nissan now sees net income at 370.0 billion yen ($2.40 billion), below its previous guidance of 390.0 billion yen ($2.53 billion).
In announcing The Arc midterm plan, Uchida said Nissan wants to deliver an operating profit margin of more that 6 percent in the fiscal year ending March 31, 2027.
Under the April 19 revision, operating profit margin is expected to come in at 4.2 percent in the fiscal year ended March 31. That is unchanged from the previous fiscal year ended March 2023.
Source: autonews.com