Nissan investors seek momentum from likely swing back to profit

NISSAN Motor probably turned profitable in the recently ended fiscal year and investors will be looking for hints as to whether that momentum will carry forward as the Japanese automaker faces new risks from rising material prices to a potential slow-down in demand for cars.

Analysts, on average, estimate Nissan will report an annual operating profit on Thursday (May 12) for the first time in 3 years, of around 223 billion yen (S$2.4 billion) for the period ended March. Nissan forecast in February a 210 billion yen profit.

Over the past 2 years, Nissan has been working to restructure operations and bolster its profitability by cutting costs, streamlining operations and increasing quality of sales via a slew of new and refreshed models. Those efforts recently got a boost by a weakened yen that's lifting the value of its overseas earnings.

At the same time, Nissan's unit sales have dropped off from the highs seen a year earlier in recent months, and challenges are mounting. Japanese automakers are grappling with impacts from the ongoing shortage of automotive chips, rising material costs and virus outbreaks in China. Nissan reported earlier this week that its April China vehicle sales dropped 46 per cent from a year earlier and said that semiconductor and supply chain disruptions were to blame.

Some analysts warn that the fiscal year ending March 2023 may bring a slowdown in economic growth that could dent global auto sales.

In the near term, the weakened yen will provide a "moderate lift" for Nissan, helping to offset other business environment challenges, according to Bloomberg Intelligence. But for later in the year, Nissan's profit outlook - likely to be issued Thursday - will reveal more on how the automaker sees these converging factors impacting its bottom line.

Beyond profit figures, investors will be looking for updates on a potential resumption of Nissan's dividend. Nissan chief operating officer (COO) Ashwani Gupta said in February that improvements in business conditions are moving the automaker closer to a point at which it can resume dividend payments. The COO pledged to provide an update at Nissan's fiscal year earnings announcement.

Investors will also be looking for updates on any new developments with regard to Nissan's alliance with Renault after Bloomberg News reported the French automaker is considering selling part of its stake in its Japanese counterpart.

Renault chief executive officer Luca de Meo and chairman Jean-Dominique Senard will be in Japan over the coming week for the monthly meeting of the alliance.

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Nissan shares fell by around 7 per cent in the recently ended fiscal year. BLOOMBERG