Nissan forecasts unexpected 7.7% profit drop

Reuters: Nissan Motor Co forecast on Thursday an unexpected 7.7% fall in operating profit this year as it sees higher raw material costs and a negative currency impact weighing on its bottomline.

Japan’s second-largest automaker expects operating profit to come in at 685.0 billion yen ($6.00 billion) in the year to March, lower than an average estimate of 778.4 billion yen from 21 analysts polled by Thomson Reuters I/B/E/S, and down from a 742.2 billion yen profit posted in the year just ended.

Nissan’s forecast is based on a projection that the yen will average 108.0 yen to the US dollar in the year through March, compared with 108.3 yen in the year just ended.

Nissan, which has an 18-year alliance and cross-shareholdings with France’s Renault, forecast global retail vehicle sales for the year ending in March 2018 of 5.83 million vehicles, compared to 5.63 million in the year just ended. In North America, its largest market, it forecast sales of 2.14 million vehicles, up 0.5%, even as a strong run of US demand for cars in recent years shows signs of petering out.

In the past year or so, strong US demand for SUVs and other larger models has boosted sales of Nissan’s Rogue crossover model, prompting the automaker to import vehicles from Japan and South Korea as local production struggled to keep up with demand. But industry data last week showed that US new vehicle sales in April declined on the year for the second consecutive month, suggesting a possible easing in full-year sales from record highs hit in 2016.

Slowing US sales are prompting automakers to push harder to sell their products, raising concerns among industry experts about rising inventory levels and consumer discounts. A pricing war in the market could undermine automakers’ profits.