Nissan withdrew its dividend outlook and said it’s now undecided on a payout, an unexpected blow to top shareholder Renault.
The Japanese automaker, which slashed its profit and sales outlook for the current fiscal year to March, had already cut its dividend earlier this year. On Tuesday, it withdrew its outlook for a 40 yen-per-share payout for the year in a filing to the Tokyo Stock Exchange. Renault shares fell as much as 3.4 percent in Paris trading.
The French automaker stands to lose the most because it owns 43 percent of Nissan.
Nissan is conserving cash as it embarks on 12,500 job cuts globally, and cost reductions aren’t happening soon enough to blunt the impact of weaker demand, higher raw materials costs and unfavorable currency trends. Makoto Uchida, who takes over as CFO next month, inherits the monumental task of restoring Nissan’s brand image and rolling out new cars that appeal to retail customers.
“Renault’s profits aren’t very good either, so less dividend means reduced cash flow and flexibility,” said Tatsuo Yoshida, a Bloomberg Intelligence analyst.
Stephen Ma, Nissan’s recently appointed CFO, said in a briefing in Tokyo that the new CEO and management team will provide an update on the dividend once they are in place starting next month.
Renault last month reduced its financial guidance for 2019, citing deteriorating results in markets including Turkey and Argentina, and spending on research and development. It embarked on its own search for a new CEO after ousting Thierry Bollore.
Back in May, Nissan had cut its annual dividend to 40 yen from 57 yen per share, marking its first reduction since payouts were suspended in 2009. Another similar cut or suspension could translate into billions in less income for Renault. At the time of the previous cut, Evercore analysts predicted Renault’s annual earnings would fall by about a fifth, about 2.2 billion euros ($2.5 billion) over three years.
The surprise announcement on the dividend underscores Nissan’s struggles as it seeks to get back on track almost a year after the arrest of former Chairman Carlos Ghosn.
For the fiscal year to March, operating profit is expected to be 150 billion yen ($1.39 billion), below the prior forecast for 230 billion yen ($2.13 billion) and just short of the analysts’ average projection for 158 billion yen. The revenue outlook was cut to 10.6 trillion yen, compared with the prior forecast for 11.3 trillion yen.
Nissan joins Honda and Mazda in cutting profit and sales outlooks for the year, as they struggle to sell cars in the U.S. and Europe. Global light vehicle production is on track to expand less than 1 percent to 94.5 million units, according to IHS Markit. Sales in China, South Asia and South America are helping to make up for declining volumes in more mature markets, the research firm said.
For the latest quarter ended September, the manufacturer reported an operating profit of 30 billion yen ($278 million), compared with analysts’ prediction for 57 billion yen. For the quarter, Nissan reported revenue slightly below the estimate for 2.64 trillion yen.
“Another quarter of low profits after an already weak first quarter means the downward revision was inevitable,” Yoshida said.
Among Japanese automakers, Toyota Motor Corp. has been the exception, joining Volkswagen Group and Ford Motor Co. in reporting better-than-anticipated results. Cost controls have helped Toyota maintain profits ahead of projections, even while it invests heavily in an industry undergoing a tectonic shift to electrification and self-driving automobiles.
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 Japanese company’s position in its three-way automaking alliance. After years of sales incentives that eroded margins and pushing businesses to buy cars, Nissan needs to rebuild its brand image and focus on appealing to retail customers.
Ghosn, who has denied all charges, is preparing for the start of his trial next year.
Uchida formally takes over from Dec. 1, following the September resignation of Hiroto Saikawa over issues related to overcompensation of income. He will work alongside new COO Ashwani Gupta and Jun Seki, the new deputy COO.
Uchida, Nissan’s third CEO since 2017, joined Nissan in 2003 from metals and machinery company Nissho Iwai Corp. He was most recently in charge of the Japanese automaker’s operations in China.