Nissan reports 26.7% y/y growth in FY 2016/17 net earnings to USD5.8 bil.




Nissan's fiscal year 2016/17 net profit improved 26.7% year on year as higher sales in the United States, China, and Europe offset damage from currency headwinds.

IHS Markit Perspective:

  • Significance: >Nissan has reported a 26.7% year-on-year (y/y) jump in net profit during fiscal year (FY) 2016/17 to JPY663.5 billion (USD5.8 billion). Revenues declined 3.9% y/y to nearly JPY11.7 trillion, while operating profit fell 6.4% y/y to JPY742.2 billion.
  • Implications: The company's sales volumes grew in most major markets during the year, including North America, Europe, and China. Sales in its home market were down.
  • Outlook: For the current FY ending March 2018, Nissan projects a net profit of JPY535 billion (down 19.4% y/y) and an operating profit of JPY685 billion (down 7.7% y/y). Revenues are expected to remain almost flat at JPY11.8 trillion (up 0.7% y/y). Nissan aims to achieve global retail sales of 5.83 million units during the current FY, up 3.6% y/y.

Nissan today (11 May) announced its financial results for the final quarter of financial year (FY) 2016/17, as well as the 12-month period that ended 31 March 2017. In January−March 2017, the automaker recorded a net profit of JPY249.3 billion (USD2.2 billion), up from JPY71 billion in the corresponding period of 2016. Operating profit jumped 33.3% y/y to JPY239 billion, on sales of JPY3.45 trillion, up 6.4% y/y. Nissan's global retail sales during the quarter totalled nearly 1.63 million units, up 6.6% y/y. For the full FY 2016/17, the automaker's net profit jumped 26.7% y/y to JPY663.5 billion, largely due to higher sales in its key regions and the sale of its stake in automotive parts supplier Calsonic Kansei. Nissan's full-year operating profit declined 6.4% y/y to JPY742.2 billion on adverse currency fluctuations. A regional breakdown of Nissan's full-year financial results reveals that operating profit surged 35.0% y/y to JPY410.1 billion in Japan, declined 28.0% y/y to JPY287.7 billion in North America, and was down 29.2% y/y to JPY61.9 billion in Asia. The automaker posted operating losses of JPY25.2 billion in Europe and JPY15.8 billion in all other regions combined. Sales revenues for the full FY reached JPY11.7 trillion, down 3.9% y/y.

Nissan's global retail sales during the FY totalled more than 5.62 million units, up 3.7% y/y. Regionally, sales reached 557,000 units (down 2.6% y/y) in Japan, 2.13 million units (up 5.9% y/y) in North America, 1.355 million units (up 8.4% y/y) in China, 776,000 units (up 3.0% y/y) in Europe, and 808,000 units (down 3.3% y/y) in other regions.

FY 2017/18 outlook

For the current FY ending March 2018, Nissan projects a net profit of JPY535 billion (down 19.4% y/y) and an operating profit of JPY685 billion (down 7.7% y/y). The Japanese automaker expects higher raw material costs and currency headwinds to dent its bottom line in the current FY. Revenues are expected to remain almost flat at JPY11.8 trillion (up 0.7% y/y). The automaker has assumed average exchange rates of JPY108:USD1 and JPY118:EUR1 in arriving at these forecasts. Nissan aims to achieve global retail sales of 5.83 million units during the current FY, up 3.6% y/y. Recently launched models including the Nissan Micra, Armada, Kicks, and Note e-Power and Serena in Japan are expected to contribute to its sales growth. Furthermore, as part of the wider Renault-Nissan-Mitsubishi alliance, the company expects to achieve JPY24-billion-worth of synergies during FY 2017/18 from purchasing, logistics, and co-operation in the Association of Southeast Asian Nations (ASEAN) region.

Outlook and implications

Nissan's operating income during FY 2016/17 declined mainly as a result of a negative impact from unfavourable foreign-exchange fluctuations worth JPY281.9 billion. Earnings were also hurt by marketing and selling expenses worth JPY258.5 billion, manufacturing expenses worth JPY5.8 billion, and other items amounting to JPY40.9 billion. These, together with foreign-exchange expenses, offset gains from volume/model mix worth JPY254.3 billion, research and development (R&D) expenses of JPY22.8 billion, and cost-reduction efforts of JPY258.9 billion. Prior to these latest results, Nissan had reported a net profit decline of 8.5% y/y to JPY414.2 billion for the first nine months of FY 2016/17 on revenues of JPY8.26 trillion, down 7.6% y/y. Operating profit stood at JPY503.2 billion during this period, down 14.3% y/y, as unfavourable foreign-exchange-rate movements dented its earnings.

During the FY, the automaker's sales volumes grew in North America, Europe (excluding Russia), and China. Sales in the United States rose 4.2% y/y to 1.58 million units amid solid demand for models including the Rogue and Altima. The automaker's Chinese sales, reported on a calendar-year basis, rose 8.4% to 1.35 million units. In Europe, excluding Russia, Nissan's sales rose by 7.2% to 683,000 units, helped by the Qashqai sport utility vehicle and Navara pick-up. Nissan's performances in these key markets helped offset challenging conditions in the Japanese market, reflecting the suspension of minicar sales in the first half of the year. Its sales in Japan – where minicar sales have now resumed – totalled 557,000 units during the FY. In other markets including Asia and Oceania, Latin America, the Middle East, and Africa, Nissan's sales decreased 3.3% to 808,000 units.

In addition to the sales increase, the growth in net income during the full FY can also be attributed to solid automotive free cash flow generation resulting from the sale of Nissan's non-controlling ownership stake in Japanese automotive parts supplier Calsonic Kansei, which makes vehicle interiors, climate control systems, compressors, exhaust systems, and electronics. In November 2016, Nissan agreed to sell its 41% stake in Calsonic to US-based private equity firm KKR & Co.

KKR launched a tender offer to obtain all outstanding shares in the company for an estimated JPY400 billion (USD3.6 billion). Calsonic will receive approximately JPY200 billion in proceeds, which it intends to use for the development of new safety and environmental technologies. Nissan's decision to sell its Calsonic stake comes as it plans to bolster its research and development (R&D) activities for electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs).

In February, long-time Nissan chief Carlos Ghosn announced he was stepping down as CEO to focus on overhauling scandal-hit Mitsubishi Motors, but said he would remain as chairman. On 1 April 2017, Ghosn was replaced as CEO by Hiroto Saikawa, who was co-CEO and representative director at Nissan and its chief competitive officer between April 2013 and October 2016. Following his appointment, Saikawa has revealed plans to enhance Nissan's ties with its alliance partners Renault and Mitsubishi. In a previous Nikkei interview, Saikawa said that Nissan would capitalise on Mitsubishi's strengths, including human resources, to shore up its business in Asia. In addition, the company will continue to direct its focus towards the development of advanced technologies such as autonomous vehicles and electric vehicles to drive profitability with its other partner, Renault.

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