Nissan raises full-year profit target despite parts shortages and lower production

The upbeat forecast comes despite Nissan having to trim production in recent months in response to an outbreak of Covid-19 in south-east Asia that disrupted its access to chips and other key parts
Nissan raises full-year profit target despite parts shortages and lower production

Japanese car giant Nissan expects to generate higher profits than expected, this year, despite lower production levels.

Nissan has raised its annual operating profit outlook, a promising sign the carmaker is still on track to climb out of the red this year despite parts shortages that have hammered production.

The Japanese carmaker raised its forecast to an operating profit of 180bn yen (€1.4bn) for the fiscal year through March, from 150bn yen announced in July. Analysts are projecting, on average, 159bn yen. For the July-September quarter, Nissan reported an operating profit of 63bn yen, compared with the 1.7bn yen loss predicted by analysts.

The upbeat forecast comes despite Nissan having to trim production in recent months in response to an outbreak of Covid-19 in south-east Asia that disrupted its access to chips and other key parts.

Resilient demand for cars coupled with a weaker yen are bolstering some Japanese carmakers’ profitability and Nissan’s new outlook underscores confidence from the carmaker that these upside factors will continue to offset issues with its supply chain.

“The upgraded forecast is a positive surprise,” said Bloomberg Intelligence analyst Tatsuo Yoshida. “The drop in incentives and fixed costs in the latest quarter was expected, but I wasn’t expecting a 70bn yen jump in profits despite a 10% drop in sales volume.” 

Revenue will be 8.8tn yen for the fiscal year, Nissan said, compared with its prior forecast for 9.8tn yen and analysts’ projection for 9.4tn yen. 

Chip shortage

While continuing fallout from the pandemic and the industry-wide chip shortage are a blow to carmakers globally, they’re hitting Nissan at a difficult time. 

That’s being offset by a revival plan called Nissan Next, unveiled last year, focused on cutting costs and capacity and improving profitability of sales with the 12 new vehicles the company intends to bring to market.

Nissan lowered its global sales target to 3.8m vehicles from a previous forecast of 4.4m. Though falling each month in the July-September quarter from a year earlier, Nissan’s unit sales are up 4.1% this fiscal year through September. Global production is up 3% from a year earlier.

Parts shortages are causing delays in Nissan’s rollout of new models such as its flagship electric vehicle, the Ariya. The company warned earlier this year it was expecting to lose about 500,000 units of production due to the ongoing chip shortage. 

As of July, Nissan was aiming to recover about half of that lost output in the second half. But since then, Nissan, like other Japanese carmakers, has been “greatly impacted” by shortages of other parts as well.

• Bloomberg

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