Nissan first-half net rises to record on stronger sales

Tokyo November 20, 2002; Kae Inque writing for Bloomberg News Nissan Motor Co.'s first-half group profit rose 25 percent to a record, propelled by increasing U.S. and domestic sales of new models, and cost cuts.

Japan's third-biggest automaker said net income increased to 287.7 billion yen ($2.4 billion), or 67.78 yen a share, in the six months ended on Sept. 30, from 230.3 billion yen, or 54.02 yen a share, in the year-earlier period. The figures were in line with preliminary earnings released on Oct. 23.

Nissan, 44.4 percent owned by Renault SA, sold stakes in partners and non-auto assets, using the proceeds for research and development. About 80 percent of Nissan's operating profit comes from the U.S., where demand is rising for its new Z and G35 sports car models, analysts said.

"The result looked very high quality," said Monika Brown, a trader at Loomis Sayles & Co. in San Francisco, which helps manage $600 million in global equities and holds Nissan Motor. "The market anticipates that the company will continue to perform well in the future as the gains are coming from increasing sales (both domestically and in the U.S.), as well as from cost cuts."

Sales rose 10 percent to 3.29 trillion yen in the six-month period, from 2.98 trillion yen a year earlier. Operating profit increased 85 percent to 348.3 billion yen, while current profit, or pretax profit from operations, more than doubled to 323.5 billion yen.

Nissan's net debt, excluding obligations of its finance subsidiary, dropped 37 percent to 270.1 billion yen at the end of September, compared with 431.7 billion yen on March 31.

The debt will fall to 80 billion yen this year, the company said, compared with 2.1 trillion yen when Renault bought its stake in 1999.

Nissan shares, which have risen about 37 percent so far this year, gained 2.3 percent to close at 967 yen in Tokyo. The announcement was made as share markets closed in Japan.

The automaker reiterated its October forecast of a third straight record annual profit of 490 billion yen in the year to March 31, 2003, or 32 percent more than the previous year's 372.2 billion yen. Full-year sales will probably rise 9.7 percent to 6.8 trillion yen, while current profit is forecast to rise 59 percent to 660 billion yen.

"Nissan should be able to meet their full-year targets," said Tatsuo Yoshida, an analyst at Deutsche Securities Ltd. "Even if the yen strengthens a bit they should be able to meet their targets."

The automaker cut purchasing costs by 7 percent in the first half, contributing 102 billion yen to its operating profit and exceeding its annual target of 5 percent.

"We hope to maintain this rate in the second half as well," said Nissan Vice President Kiyoto Shinohara at a Tokyo press conference.

The automaker had a pretax gain of 71 billion yen in the first half, of which 60.7 billion yen was derived from selling fixed assets, including its Murayama plant which it closed in March 2001. Nissan had a pretax charge of 29.5 billion yen, which includes 11.4 billion yen from its affiliate Aichi Machine Industry Co.'s manual transmission defaults. Nissan held 41.4 percent of Aichi Machine as of March 2002.

Nissan said it expects exchange rates of 125 yen to the dollar and 110 yen to the euro for the second half, which began on Oct. 1. For the full year, it's forecasting rates of 124 yen to the dollar and 118 yen to the euro.

The yen weakened against the U.S. dollar in the first half by 0.8 percent on average to 123.11 yen, from 122.1 yen a year earlier. The currency traded at 120.96 to the dollar at 6:33 p.m. in Tokyo.

A 1 yen movement against the dollar has an impact of about 9 billion yen on Nissan's operating profit, while the effect is about 1.5 billion yen for a similar move of the yen against the euro, analysts said.

Deutsche's Yoshida said that any risks for Nissan will come externally such as the extreme strengthening of the yen against the dollar, declines in the market in the U.S. stemming from a weaker economy, possibilities of further terrorist-related activities and another port strike on the U.S. West Coast.

The company said its corporate tax rate was about 25 percent in the first half this year and will go up to 40 percent in the second half which began on Oct. 1. The average rate will be about 30 percent this business year.

In the first half, U.S. sales rose 8.3 percent to 378,000 units, while the automaker sold 383,000 vehicles at home, a 12 percent increase. European sales fell 9.4 percent to 251,000 units as Nissan prepared for the release of its Micra compact next business year, the company said in a release.

For the year ending March 31, 2003, the automaker now expects unit sales in Japan to rise 14 percent to 816,000 and U.S. sales to increase 11 percent to 795,000. European sales will fall 1.8 percent to 484,000 units.

First-half operating profit in Japan rose 36 percent to 174.2 billion yen, while North American operating profit more than doubled to 148.8 billion yen. Nissan's operating profit in Europe was 7 billion yen, up from a loss of 4.6 billion yen. Operating profit in other regions more than quadrupled to 11.3 billion yen.

The world's second-biggest automaker by market value said it plans to buy back as many as 30 million shares for as much as 30 billion yen between Nov. 20 and Feb. 19, 2003.

Nissan said it has applied to have its shares delisted from the exchanges in Osaka, Fukuoka, Nagoya and Sapporo, as trading volumes there are low.