Nissan Motor Co. posted a 15 percent drop in operating profit in the latest quarter as foreign exchange losses, falling revenue and rising incentives sapped earnings.
Operating profit declined to 163.51 billion yen ($1.40 billion) in Nissan’s fiscal third quarter ended Dec. 31, Corporate Vice President Joji Tagawa said Thursday while announcing results.
Net income increased 3.5 percent to 131.73 billion yen ($1.13 billion) in the October-December period, from a year earlier. Nissan attributed the rise partly to increased income from equity and earnings from AFFILIATED COMPANIES, such as Nissan’s Chinese joint venture, and a one-time expense in the same quarter of the previous year that depressed results then.
Worldwide revenue decreased 2.2 percent to 2.94 trillion yen ($25.29 billion) in the quarter, as global retail sales advanced 8.3 percent to 1.38 million vehicles.
Tagawa said Nissan’s core auto performance in the quarter remained strong but that earnings results were dented largely by the appreciation of the Japanese yen. Shifting foreign exchange rates cut some 81.6 billion yen ($699.1 million) off operating profit in the fiscal third quarter.
Operating profit margin came to 6.7 percent at the end of the third quarter, still distant from CEO Carlos Ghosn’s Power 88 mid-term business plan goal. It targets a global operating profit margin of 8 percent and an 8 percent market share by March 31, 2017.
But Ghosn told Automotive News in October that his company was unlikely to get to 8 percent by next spring because foreign exchange rates are sapping earnings.
Nissan finalized its purchase of a controlling 34 percent stake in Mitsubishi last October and appointed Ghosn its chairman. At the time, Ghosn forecast nearly half a billion dollars in savings as soon as next fiscal year as the group joins a club of automakers operating at a massive scale.
Nissan is also especially sensitive to any changes in U.S. trade policy as Trump considers a tariff on vehicles from Mexico and a border adjustment tax imports from elsewhere.
Nissan imports about 42 percent of the vehicles it sells in the U.S. but is even more vulnerable to a Mexico tariff. Nissan sources about 22 percent of its U.S. volume south of the Rio Grande.
