Nissan not changing its earnings forecast for the full year, despite income decrease

Article by Christian A., on February 11, 2013

Nissan Motor Co.’s profit declined by 35% after sales decreased in China and new models fell behind its rivals in the U.S. In the quarter that ended Dec. 31, the net income decreased to 54.1 billion yen ($581 million). For the same period the previous year, it posted a net income of 82.7 billion yen. Nissan is not changing its earnings forecast for the full year.

These results demonstrate how the China-Japan territorial clash is eclipsing the benefits from a weaker yen. Nissan CEO Carlos Ghosn has been asking for additional yen depreciation. Furthermore, Nissan was damaged after the new Altima’s sales (the topselling vehicle in the U.S.) fell behind the Toyota Camry and Honda Accord. Kota Yuzawa, an analyst at Goldman Sachs Group, has a “big exposure in China” and was affected much by the protests.

Due to the incentives war, the sales volume of new models in the U.S. is lower than Nissan’s expectations. In a statement, Ghosn said that how Nissan performed in the third quarter failed to meet expectations. He also said that Nissan will soon have “important vehicle launches” and that it expects additional correction to the yen. Nevertheless, Nissan has retained its average exchange-rate assumptions for the fiscal year at 79.7 yen to the dollar and 101.8 yen to the euro.

As Abe's administration aims to counteract deflation and revitalize Asia's No. 2 economy, the Japanese currency (which trades near its lowest levels in over two years) may end the year at 93 versus the dollar, according to the median of forecasts that Bloomberg had gathered.

The yen started falling in November as Prime Minister Shinzo Abe, who then runs for office, asked for "bold monetary policy" to beat deflation and pull down the yen’s value. This week, the Japanese currency decreased to 94.06 per dollar for the first time since May 2010, due to rumors that Japan's government will choose a new central bank chief dedicated to boosting monetary easing.

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