YOKOHAMA, Japan – Nissan Motor Co. reported a 70 percent drop in operating profit in the latest quarter as falling sales, unfavorable foreign exchange rates and rising costs undercut earnings, though the company said it is seeing improvements in North American performance.
Operating profit dropped to 30 billion yen ($278.0 million) in fiscal second quarter ended Sept. 30, the scandal-tainted Japanese automaker said Tuesday in its quarterly results.
Net income fell by more than half to 59 billion yen ($546.8 million) in the July-September period.
Nissan’s revenue decreased 6.6 percent to 2.63 trillion yen ($24.4 billion) in the three months, and global retail volume declined 7.5 percent to 1.27 million vehicles.
Despite the plunge in parent-company performance, Nissan’s business in the key U.S. market showed signs of a correction, Corporate Vice President Stephen Ma said in a briefing at Nissan’s global headquarters.
Incentive costs were coming under control, dealer inventory was being reduced and regional operating profit was buttressed by reduced selling expenses, Ma said.
“We are already starting to see improved quality of sales in the U.S., which is our primary focus right now,” said Ma, who takes over as Nissan’s CFO from Dec. 1, as part of a new management team led by incoming CEO Makoto Uchida.
“We are not chasing market share. We are not chasing volume. We are really focused on sustainable long-term growth,” Ma said.
Heavy discounting and fleet sales, particularly in the U.S., have left Nissan with a cheapened brand image and low vehicle resale value as well as dented profitability.
North America booked a regional operating profit of 35.9 billion yen ($332.7 million) in the July-September period, virtually unchanged from 36.0 billion yen ($333.6 million) a year earlier, despite a 7.5 percent decline in retail sales to 425,000 vehicles in the quarter.
Europe narrowed its regional operating loss to 10.1 billion yen ($93.6 million), from 12.2 billion yen ($113.1 million) the year before. European sales fell 23 percent to 130,000 vehicles.
At the parent company level, a 20.1 billion yen (186.3 million) quarterly reduction in global selling expenses, was all but wiped out by a 19.1 billion yen ($177.0 million) hit from falling sales, Nissan said.
Foreign exchange rate losses lopped another 17.7 billion yen ($164.0 million) off operating profit in the quarter, thanks to an appreciating Japanese yen.
The downturn adds to the sense of urgency enveloping Nissan as it struggles to repair strained relations with alliance partner Renault, which owns 43 percent of Nissan, reboot slumping sales and reform corporate governance following last year’s arrest of former Chairman Carlos Ghosn for alleged financial misconduct.
Nissan is embarking on a global restructuring plan that involves cutting 12,500 jobs worldwide.
Ma said Uchida is expected to review business targets and the company’s revival plan.
Uchida, 53, takes the helm following September’s resignation of former CEO Hiroto Saikawa, and his management team may usher in yet more change.
Looking ahead, Nissan downgraded its previously announced earnings outlook for the current fiscal year, citing a bigger than expected decline in sales and worsening foreign exchange rates.
Nissan now expects global sales to drop to 5.24 million vehicles in the current fiscal year ending March 31, 2020, from 5.52 million units the previous year. In July, Nissan had projected that worldwide sales would actually increase to 5.54 million vehicles in the current fiscal year.
Operating profit is expected to fall by more than half to 150.0 billion yen ($1.39 billion), to a level worse than the 230.0 billion ($2.13 billion) outlined earlier.
Net income is also expected to erode by more than half to 110.0 billion yen ($1.02 billion), compared with an earlier goal of 170.0 billion yen ($1.58 billion).
Operating profit margin will dwindle to 1.4 percent compared with the 2.7 percent to recorded in the previous fiscal year ended March 31.
Reuters contributed to this report