Nissan cuts 2012 net profit forecast by 20% to $3.99 billion

Article by Anita Panait, on November 7, 2012

Nissan Motor Co. updated its full year 2012 forecast to reflect a 20-percent decrease in net profit to $3.99 billion. The updated figures also reflect the fiscal cost of anti-Japanese demonstrations in China, due to the current territorial dispute between the two countries. Nissan also announced that it lost a chunk of its market share in China.

Nissan’s full-year downward revision mirrors a similar move by fellow Japanese carmaker Honda, which also trimmed a fifth off its 2012 guidance. On the other hand, another Japanese rival, Toyota, revised its full-year guidance to reflect an increase in net profit. All three carmakers are selling vehicles in China, but since Toyota has less exposure in the country, the impact of the anti-Japanese protest isn’t as heavy on Nissan and Honda.

Japanese products were boycotted in China, halving the demand for vehicles manufactured by Nissan, Honda and Toyota in a country that is considered as the largest vehicle market in the world.

Of the three Japanese carmakers, Nissan is the most exposed to China, which accounted for 27 percent of its global vehicle sales in the quarter ended September. For the period, Nissan said it posted a 7.7-percent jump in profit to JPY106 billion ($1.32 billion), despite logging lower than expected car sales in the United States and Europe.

Nissan said that the full impact of the China damage will come through in the second half of 2012. According to the carmaker, a stronger yen against Russian and Brazilian currencies and higher selling costs trimmed its operating profit over the first half of its fiscal year.

Christopher Richter, senior analyst at CLSA Asia-Pacific markets, said that given the share price performance, he suspects that “a lot of the bad news is priced in already.” Richter remarked that Nissan hiked its first-half dividend by 25 percent to make the market feel a little better when it looks at its reduced earnings.

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