Nissan Keeps Losses Lower

Nissan losses lower than expected
 
The world’s third largest carmaker, Nissan Motor Company (NSANY), posted a modest net loss of 9 cents (¥4.06) per share in the first quarter of fiscal 2009.

The loss was largely driven by the slump in global car demand, negative impact of a stronger yen, sharp decline in consumer confidence in all the major markets and product mix deterioration. Reported losses were significantly lower than the Zacks consensus forecast of 80 cents.

Cost-cutting efforts, coupled with the government stimulus, helped Nissan curb losses in the quarter. The government of US, Germany, Japan and China are offering consumers credits, tax breaks and subsidies for trading in old cars for new fuel-efficient models. However, we remain concerned about Nissan’s prospects as these government incentives will not be available for much longer.

Operating costs shrunk 37% year over year to $25.2 billion (¥2.4 trillion). Nissan, under its recovery plan, announced in fiscal 2008 intended to reduce labor costs by 20% to $6.8 billion (¥700 billion) in fiscal 2009 and reduce salaries of the Board of Directors as well as corporate officers by 10%, managers by 5%, and eliminate bonus payments to the Board of Directors.

Global sales in the quarter were 723,000 vehicles, down 22.8% from the previous year. Lower volumes drove a 35.5% decline in the top line to $15.55 billion. Revenues in the Automobile segment declined 37% to $14.7 billion (¥1.4 trillion) while that in the Sales Financing segment declined 17% to $15.7 billion (¥1.5 trillion).

On a regional basis, sales were down 31.6% in North America to 225,000 units, 21.6% in Japan to 116,000 units and 24.6% in Europe to 118,000 units while it increased 29.8% in other foreign countries to 119,000 units.

Like its peers, Nissan is also eyeing emerging markets such as China, Brazil and Russia. Sales were strong in China, surging 9.3% during the first quarter to 145,000 vehicles.

Nissan's Chinese partner, Dongfeng Motor Co. Ltd., plans to expand the Huadu passenger vehicle plant in Guangzhou City, which will an another assembly line, set to start running in 2012. Total investment will be $730 million. Dongfeng Nissan's current annual production capacity in China at plants in Huadu and Xiangfan is 360,000 units. The expansions will ramp up capacities to 600,000 vehicles.

Outlook

For fiscal 2009, Nissan has kept its forecasts unchanged. It expects net revenues of $73 billion (¥6.95 trillion), down 17.6% year over year. The company expects operating loss of $1.05 billion (¥100 billion) and net loss is expected at $1.79 billion (¥41.74) per share.

Given worsening market conditions, the company expects global sales to decline 9.7% year over year to 3.08 million units. Global production is forecasted at 2.95 million vehicles. The company plans to reduce global headcount by 20,000 to 215,000 and cut back dealer inventories by 20% year over year to 480,000 through fiscal 2009.
 
New products

Nissan has launched three models out of the eight it plans in fiscal 2009. Nissan aims to take a lead in zero-emission cars and will unveil its first model in Japan on August 2.

However, Nissan has been slower than rivals Toyota Motor Corporation (TM) and Honda Motor Company (HMC) in its foray into fuel-efficient petrol-electric hybrids. Sales of Toyota 's Prius and Honda’s Insight are already booming in Japan.

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