Nissan's European loss widens to $43M on sales slump
YOKOHAMA, Japan -- Nissan reported a 29 percent decline in operating profit in the most recent quarter as foreign exchange rate losses and rising commodity costs combined with falling sales in the United States and Europe to dent global performance.
Operating profit fell to 109.1 billion yen ($985.8 million) in the fiscal first quarter ended June 30, the company announced in its Thursday earnings report.
Net income declined 14 percent to 115.8 billion yen ($1.05 billion) in the April-June period.
Revenue dipped 1.6 percent to 2.72 trillion yen ($25.58 billion), as worldwide retail sales declined 3 percent to 1.31 million vehicles in the three-month period.
Nissan’s results were hit by the Japanese yen’s appreciation against the U.S. dollar and other currencies. Exchange rates lopped 19.3 billion yen ($174.4 million) off the quarterly operating profit, while rising raw material costs dented results by 27 billion yen ($244 million).
Deteriorating wholesale volume and mix took a 68.1 billion yen ($615.3 million) bite out of the quarter amid sliding sales in Europe and the U.S., the Japanese carmaker’s biggest market.
“In summary, our results for the quarter were unfavorable as we faced a number of challenges,” Corporate Vice President Joji Tagawa said while announcing the numbers. “Nissan remains focused on enhancing the quality of sales, particularly in the United States.”
Still, Nissan was able to make some progress on reining in marketing and selling expenses, a top priority for CEO Hiroto Saikawa. He is pivoting the company away from profit-draining fleet sales and incentives in the U.S. in an attempt to shore up brand value and margins.
Saikawa has said Nissan is prepared to sacrifice some volume to bolster margins. This spring, the company began pulling back fleet deliveries, culling bloated inventories and easing pressure on dealer sales incentive programs, even as the U.S. light vehicle market softens.
Nissan said it slashed U.S. inventories by 68,000 vehicles in the fiscal first quarter, from a year earlier, contributing to a 30,000-unit reduction worldwide. The worldwide lot of dealer and factory inventory stood at 910,000 vehicles in June, down from 940,000 a year earlier.
“In this aspect we are in good shape,” Tagawa said. But volume also fell, as Nissan dealers awaited the arrival of next-generation products to fill their showrooms.
Sales in North America, Nissan’s biggest market, slid 9.5 percent to 482,000 vehicles in the quarter, while regional operating profit dipped 2.6 percent to 49.5 billion yen ($447.3 million).
Operating losses in Nissan’s European unit widened to 4.7 billion yen ($42.5 million) in the fiscal first quarter, from an operating loss of 2.7 billion yen ($24.4 million) the year before. European sales declined 13 percent to 162,000 vehicles in the three months.
Tagawa said U.S. sales and profitability should perk up in the second half of the year.
New offerings arriving this year include the Kicks subcompact crossover, the Infiniti QX50 crossover and the next-generation Altima sedan.
Nissan kept its outlook unchanged for the current fiscal year ending March 31, 2019.
It predicts operating profit will decline 6 percent, undermined by deteriorating foreign exchange rates. Net income is seen falling 33 percent.
Global sales are forecast to increase 2.7 percent to 5.93 million vehicles.
In recent months, the yen has turned on Nissan. Now the company is fighting unfavorable exchange rates in tandem with plateauing demand in the U.S.