Nissan warns of losses, delays earnings report due to pandemic

Nissan Motor Co. warned that it expects to post a loss for the just-ended fiscal year, becoming the latest global automaker to be hit by the coronavirus pandemic.

Operating profit for the year through March will be as much as 130 billion yen ($1.2 billion) less than the 85 billion yen forecast in February, the Japanese automaker said Tuesday. The Yokohama-based company also gave an outlook for a net loss, 150 billion to 160 billion yen lower than the prior forecast for 65 billion yen profit. That translates into an operating loss of as much as 45 billion yen and net loss of as much as 95 billion yen.

The earnings shortfall shows the depths at which Nissan and much of the automotive industry finds itself in after the pandemic closed showrooms and factories across the planet. Nissan was already struggling with shrinking sales before the virus broke out, hurt by an aging lineup and a management paralysis brought about by the arrest of former leader Carlos Ghosn in late 2018.

“The result in the first quarter — or the first half of the year — will likely be much worse than the fourth quarter,” said Tatsuo Yoshida, an analyst at Bloomberg Intelligence. “Operation suspensions happened not just in March, but they will be extended until June.”

Nissan said it will need more time to compile its results because of “delays in the company’s financial close and audit process caused by the Covid-19 pandemic and lockdowns in several locations,” and plans to announce them on May 28.

Companies across industries are delaying earnings reports and pulling forecasts as the wide-ranging fallout from the pandemic has clouded their outlooks. Daimler AG threw out a forecast made two months ago that estimated significantly higher profit this year while Renault SA, Nissan’s partner in a global alliance, said it’s still not possible to assess the virus’s impact. Volvo AB said it can no longer give reliable estimates for truck markets after registrations plunged.

A Daredevil’s Guide to a Very Wild Earnings Season

Nissan said 90 billion yen of the anticipated drop in operating income was caused by a decline in vehicle and parts sales. Another 30 billion is due to “additional provisions for the sales finance business,” it said. Declining income at subsidiaries were responsible for an additional 30 billion yen drop.

Further revisions to profit may be in store due to revisions to Nissan’s midterm plan, which is being reassessed, the carmaker said.

The company has promised a turnaround plan next month, which be probably be unveiled at around the same time as the delayed earnings report. Given the current pandemic environment, Nissan Chief Operating Officer Ashwani Gupta said he’s focusing on increasing market share, cutting costs and managing cash.

“This crisis is giving me an opportunity to look into fixed costs,” Gupta said in an interview. “It’s forcing us to innovate things, like how we sell cars.”

The company has requested loans totaling 500 billion yen from lenders including Japan’s three megabanks as it battles the sales slump, bankers familiar with the matter said this month. Toyota Motor Corp. has asked for a 1 trillion yen credit line from two major Japanese banks to secure its funding.

“We have enough cash on hand,” Gupta said. “The cash situation is keeping things stable.”

“I wonder if Nissan will actually carry out the midterm plan and job cuts,” said Seiji Sugiura, an analyst at Tokai Tokyo Research Center. The company probably won’t take drastic steps, such as closing plants in Europe and the U.S., he added.

Nissan’s earnings outlook is “challenging” in the near term as it plans to cut jobs, and it will probably suspend dividends this fiscal year, analysts at Goldman Sachs Group Inc. said in a report earlier this month.

Nissan also reported a 43% drop in global sales for March from a year earlier, as production volume fell 41%. Gupta said, though, that sales were picking up in China as the economy reopens after its lockdown. Nissan is gaining share there, the COO added. “Markets in China are coming back.”

Japan’s automakers reported sales and output figures for March on Tuesday, reflecting similar declines. Toyota and Honda Motor Co. are scheduled to announce results on May 12.

— Shiho Takezawa and Tsuyoshi Inajima (Bloomberg)