Nissan Announces Growth in Profitability for FY 2007/08, Warns of Difficulties This Year

Nissan has announced its financial results for the fiscal year (FY) 2007/08, showing growth in revenues and an upswing in profitability following a downturn a year earlier. For the 12 months ending 31 March 2008, the company's sales grew by 3.4% year-on-year (y/y) from ¥10.469 trillion (US$101.2 billion) to ¥10.824 trillion. This resulted in a small rise in operating income from ¥776.9 billion to ¥790.8 billion, while net profit posted an even stronger upswing of 4.7% y/y to ¥482.3 billion. The results for a year earlier include a fifth quarter following the change in accounting standards from a January-December financial year to an April-March financial year for some regions.

Total sales for Nissan globally last fiscal year reached 3.77 million units, an increase of 8.2% y/y, with the majority of these coming in North America. Sales in the United States, by far its largest single market, rose by 2.3% y/y to 1.059 million units, and Canadian sales increased by 8.3% y/y to 77,000 units, although Mexican sales slipped again, this time by 5.5% y/y to 216,000 units. Its Japanese sales remained in the doldrums, affected by the overall malaise that has hit the market for over two years, slipping by 2.5% y/y to 721,000 units. By comparison, Nissan's European sales performed magnificently, growing by 17.9% y/y to 636,000 units as a result of expansion in the east of the region. Sales in its General Overseas Markets (GOM), which include a number of the fastest-growing vehicle markets in the world, expanded by 22.1% y/y to 1.061 million units.

While announcing its financial performance, Nissan also revealed its latest mid-term plan, to be known as "Nissan GT 2012". Covering five years, starting from 1 April 2008 and lasting until the end of FY 2011/12, the plan, which stands for "growth" and "trust", contains three commitments from the business:

• Quality leadership to improve service, the brand, and management within the business.
• Zero-emission vehicle leadership, which will include the introduction of an all-electric vehicle for the U.S. and Japanese markets by 2010, before being rolled out to other regions.
• An average 5% increase in revenues over five years, underpinned by 60 new vehicle launches and the introduction of 15 new technologies per annum from 2009.

The company will also implement an expansion of its Infiniti brand and light commercial vehicle (LCV) business, as well as expansion in Brazil, Russia, India, and China (BRIC) and the Middle East.

Outlook and Implications

Although the growth in profitability last FY is minor when compared to the earlier expansion of Nissan following its near bankruptcy in the late 1990s, it is a far better performance than the previous year, when it suffered an 11% downturn in net profits as raw material and energy cost hikes combined with a poor price and volume mix, although the weakness of the Japanese yen offset this to a certain degree. During FY 2007/08, despite further hiccups in the first quarter, the company regrouped, and as well as being boosted by the weak yen again, it launched further models, including the Qashqai/Dualis/Rogue sport utility vehicle (SUV), the Altima, the Livinia, the single-cab Frontier/Navara pick-up, and the GT-R, while from the Infiniti brand it introduced the G37 coupé and EX small SUV.

The latest mid-term plans contain nothing dramatic in terms of moving the business forward as many of the points can be allied to earlier announcements from the carmaker. These include the planned introduction of Infiniti onto the European market, which has remained largely untapped up until now. The LCV sector has been an area of strong growth for Nissan so far, and this will no doubt improve as the company seeks to enter the U.S. market with more of this type of vehicle built in the region, while it has also signed a three-pronged joint venture (JV) in India with Ashok Leyland with regards developing and assembling LCVs (see India: 29 October 2007: Nissan and Ashok Leyland Plan US$500-mil. Joint Ventures in India). India will also be the base for two new passenger car manufacturing projects alongside alliance partner Renault. The first will see investment of more than US$1.1 billion by the pair, which will yield a plant with the capacity to build 400,000 units per annum (upa), split between the two businesses, which Nissan will use mainly to build small vehicles for local sale and export (see India: 25 February 2008: Renault-Nissan Signs MoU for New Production Facility in India). The second project will see the pair work with motorcycle manufacturer Bajaj Auto to develop and build a car with a price tag of around US$2,500 (see India: 12 May 2008: Renault-Nissan and Bajaj Auto Announce US$2,500 Car for 2011). It will also expand its Chinese operations further over the course of this year, hoping to top more than half a million sales in the market, and it is set to complete a new plant in Russia to capitalise on this area of growth by 2009. The automaker has also stated its intention to build vehicles with zero emissions, having invested in a lithium-ion battery JV with Japan's NEC, and these are likely to find their way into the vehicle built as part of "Project Better Place", in which the alliance pairing are said to be prepared to invest over US$1 billion.