Nissan Motor Co posted a surprise gain of 12 percent in quarterly operating profit on Friday as a pickup in its global car sales outweighed rising commodity prices, and it kept its full-year forecasts unchanged.
Nissan, Japan's third-biggest automaker held 44 percent by Renault SA, had been expected to suffer a fall in core profits on weak domestic sales and as demand for the Titan pickup and other high-margin light trucks shrank in its biggest market, the United States, due to heated competition and expensive fuel.
But driven by solid sales of smaller cars in the United States and in emerging markets, such as the Middle East and Mexico, Nissan's global sales grew 6.6 percent to 941,000 vehicles for the July-September second quarter. Revenue rose 13 percent to 2.618 trillion yen ($22.9 billion) -- above market expectations.
This is very good -- much better than expected, Credit Suisse auto analyst Koji Endo said.
Provided that the U.S. subprime problem and currency rates aren't going to be bad, I believe we may be able to add expectations of a revision.
Second-quarter operating profit was 218.71 billion yen ($1.91 billion), beating an average estimate of 183.5 billion yen in a survey of four brokerages by Reuters Estimates. That lifted its profit margin back to the year-ago level of 8.4 percent, and above 6.1 percent in the first quarter.
Net profit slid 27 percent to 120.11 billion yen from the year before, when it booked extraordinary gains from the sale of shares in its truck affiliate and had a lower tax rate.
The results, which came after market hours in Tokyo, pushed Renault's shares up 3.4 percent in Paris.
You can expect more in the second half, Carlos Ghosn, chief executive of both Nissan and Renault, told a news conference.
Having anticipated soft industry-wide demand in the United States from the beginning of the year, Ghosn said the current downturn in the market would not derail Nissan's sales plans.
He repeated that he was not optimistic about total U.S. volumes for next year, due partly to the subprime mortgage issue. But he added that new products such as the Rogue and Infiniti EX car-cum-SUV crossovers should drive sales.
We feel good about our 3.7 million-car forecast for record global sales this year, he said.
Ghosn this week also unveiled a new incarnation of Nissan's top of the line GT-R sports car at the Tokyo Motor Show, saying the car would boost its brand image and increase showroom traffic to sell other, mainstay products.
LITTLE RISK FROM YEN?
Nissan joins larger rival Honda Motor Co in reporting improved profits. Second-ranked Honda's operating profit jumped 48 percent last quarter on brisk sales of its fuel-efficient CR-V crossover.
Toyota Motor Corp, the world's biggest automaker, is due to report on Nov. 7.
Many analysts have said they expected Nissan to fall short of its full-year targets, partly due to the yen's recent resilience against the dollar and soaring commodity prices.
But Ghosn said he did not expect the yen to strengthen much beyond current levels of around 114 yen to the dollar in the second half of the business year.
Nissan's assumption for the year to March remains at 117 yen, and the first half average was 119 yen, meaning an average rate of around 114 yen for the second half would shield it from any significant negative impact.
Consensus forecasts before the results came out put Nissan's operating profit at 785.5 billion yen for 2007/08, against the company's projection of 800 billion yen. Nissan left its net profit forecast at 480 billion yen, or up 4.2 percent from 2006/07.
Nissan shares fell 22 percent in the year to Friday, underperforming Tokyo's transport sub-index, which has lost 15 percent.
Nissan said on Friday it plans to buy back up to 20 million of its own shares, or 0.44 percent of its outstanding shares, worth up to 27 billion yen between Nov. 1 and Dec. 28.