Customer Logins
Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Customer LoginsNissan's H1 FY2016/17 net profit declines 13.3% y/y to USD2.7 bil.
Nissan's earnings during the first half of the current fiscal year were mainly hit by unfavourable foreign exchange fluctuations.
IHS Markit Perspective
- Significance: Nissan has reported a 13.3% y/y decline to JPY282.4 billion (USD2.73 billion) in net income during the first six months of FY 2016/17. Total revenues declined 10.3% y/y to nearly JPY5.32 trillion, while operating profit dropped 14% y/y to JPY339.7 billion.
- Implications: The company's volumes rose in the United States and China during the period, but the biggest slump came in Japan. Deliveries in Japan declined by 20.2% y/y due to sluggish domestic market conditions and a fuel-economy scandal affecting sales of its Dayz and Dayz Roox mini-vehicle models.
- Outlook: This was the third consecutive quarter of declining earnings for the Japanese automaker after it had recorded a 10.7% y/y decline in first quarter of the current fiscal year and a 40.2% y/y dip in the final quarter of FY 2015/16. Nissan has maintained its current full-year FY 2016/17 forecast, previously announced in May.
Nissan has reported a 15.5% year-on-year (y/y) decrease in net income for the second quarter ended 30 September. In a statement on its website, the automaker said that its net profits stood at JPY146.1 billion (USD1.41 billion) during the period, down from JPY172.7 billion in the same period of fiscal year (FY) 2015/16. Total revenues declined 12% y/y to nearly JPY2.66 trillion, while operating profit dropped 18.6% y/y to JPY163.9 billion. However, the global sales volumes marginally improved 0.4% y/y to 1.321 million units during the quarter.
For the first six months of FY 2016/17, the automaker's net profits declined 13.3% y/y to JPY282.4 billion (USD2.73 billion) on revenues of JPY5.32 trillion, which declined 10.3% y/y. Operating profit reached JPY339.7 billion (down 14% y/y). Nissan's global sales volume remained almost flat during the period with 2.613 million units as compared to 2.616 million units in the corresponding period of the previous year. The sales volume was mainly helped by North America, where volume rose 5.4% y/y to around 1.1 million units, and Asia, which recorded sales of 778,000 units (up 2.9% y/y). Sales volume was down in Japan (211,000 units, down 20.2% y/y), Europe (382,000 units, down 1.4% y/y), and Other regions (214,000 units, 8.4% y/y). Carlos Ghosn, president and chief executive officer (CEO) said, "In the first half, Nissan generated a solid operating profit of 339.7 billion yen, which represents a 6.4% margin on net revenues of JPY5.32 trillion ...These solid results were achieved despite recent currency headwinds and continued challenges in Japan and emerging-markets."
Outlook and implications
This was the third consecutive quarter of declining earnings for the Japanese automaker after it had recorded a 10.7% y/y decline in first quarter of the current fiscal year and a 40.2% y/y dip in the final quarter of FY 2015/16. Negative impact from the unfavourable foreign-exchange fluctuations to the tune of JPY179.8 billion during the H1 FY 2016/17 and JPY13.1 billion in the final quarter of FY 2015/16 mainly attributed to these declines. Earnings during the first half were also affected by marketing and selling expenses of JPY76.8 billion and manufacturing expenses of JPY9.6 billion. These together with forex expenses offset gains from volume/model mix worth JPY43.5 billion, research and development (R&D) expenses of JPY19.6 billion, and cost-reduction efforts of JPY142.7 billion.
For the first six months of the FY, the automaker benefited from the strong retail sales growth in the United States and Mexico to 783,000 units (up 3.7% y/y) and 191,000 units (14.8% y/y). The growth was helped by strong demand for the Altima sedan and Rogue sport utility vehicle (SUV). In China, first-half sales grew 3.8% y/y to 610,000 units, boosted by the company's Sylphy and X-Trail models. Japanese sales of Nissan slumped 20.2% in the first six months of the FY due to sluggish domestic market conditions continuing from last year's 50% rise in mini-vehicle ownership tax. Nissan took a further hit after a fuel-economy data scandal involving Mitsubishi-supplied models was uncovered in April 2016, resulting in stop sales of the Dayz and Dayz Roox mini-vehicles. Nevertheless, models such as the new Serena and X-trail helped the automaker's domestic volume.
Last month, Nissan completed the purchase of a 34% equity stake in Mitsubishi, with Ghosn being named as chairman, president, and CEO of Mitsubishi. Following the completion of the transaction, Mitsubishi has become part of the Renault-Nissan Alliance, paving the way for a wide-ranging synergy programme and building on a five-year collaboration in mini-vehicles between the two companies. The two companies will seek to reduce costs through joint purchasing, deeper localisation, joint plant utilisation, common vehicle platforms, and technology sharing. They also plan to co-operate in emerging and developed markets.
Nissan has maintained its current full-year FY 2016/17 forecast previously announced in May, and expects a net profit of JPY525 billion (up 0.2% y/y) and an operating profit of JPY710 billion (up 10.5% y/y), on sales of JPY11.8 trillion (up 3.2% y/y). "Although Nissan faces market uncertainty and currency headwinds, we expect to continue to deliver solid earnings and positive free cash flow generation in the current fiscal year," said Ghosn. "We can also look forward in fiscal year 2017 to valuable synergies from our alliance with Mitsubishi Motors, in which we recently acquired a 34% stake." Nissan aims to achieve global retail sales of 5.6 million units during the current FY, up 3.3% y/y. According to IHS Automotive forecasts, total sales at the Nissan Group will grow by 1% y/y to just over 5.15 million units in 2016.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.