Global Insight Perspective | |
Significance | Net profit rose by 1.1% y/y for Nissan to ¥518.1 billion (US$4.6 billion) in FY 2005/06 with operating profit up by 1.2% y/y to ¥871.8 billion. |
Implications | Nissan president and CEO Carlos Ghosn described the FY 2005/06 results as a 'solid performance' in a year of little new product activity and high operating costs. |
Outlook | Nissan faces a difficult first half of FY 2006/07 as its slowdown in new product activity continues but its prospects look brighter in the second half as its next wave of new products phases in. |
Nissan Posts Record FY 2005/06 Net Profit
Japanese automaker Nissan has announced its sixth consecutive record net profit in financial year (FY) 2005/06 (April-March). Net profit for the automaker rose by 1.1% year-on-year (y/y) in the period to ¥518.1 billion (US$4.6 billion). Net revenue climbed by 9.9% y/y in the period to ¥9.4 trillion. Operating profit rose by 1.2% y/y to ¥871.8 billion. Operating margin came to 9.2%.
In the fourth quarter of FY 2005/06 (January-March) Nissan posted a 9.4% rise in net profit to ¥152.4 billion. Net revenue rose by 6.4% y/y in the period to ¥2.6 trillion. Operating profit fell by 3.4% y/y to ¥240.6 billion, and operating margin came to 9.1%.
Nissan president and chief executive officer (CEO) Carlos Ghosn described the financial results as a 'solid performance' in a difficult market climate of 'higher raw material prices, higher energy costs, higher interest rates and higher incentives'.
Global Sales Show Steady Growth
Nissan continued to post sales growth despite little new product activity in FY 2005/06. Global sales climbed by 6.1% y/y to a record 3.6 million units. By region, Nissan posted the following sales performance:
- Sales in the United States rose by 6.1% y/y to 1.1 million units despite no new model activity;
- In Japan sales fell by 0.7% y/y to 842,062 units;
- European sales fell by 0.6% y/y to 540,945 units; and
- Sales in other markets rose by 13% y/y to 1.1 million units.
Sales in the fourth quarter fell by 6.3% y/y to 915,662 units due to lower sales in the United States, Japan and Europe.
Outlook and Implications
Ghosn described FY 2006/07 as being a year of two halves. Growth in the first half is expected to be difficult to achieve due to a continuing lack of new product activity. Prospects for the automaker are brighter in the second half as Nissan begins the next phase of its new product offensive as part of its Value-Up growth plan.
Nissan launched its Value-Up plan in April 2005. Nissan Value-Up entails increasing global sales to 4.2 million annual units by the financial year ending March 2009 involving the release of 28 new models and the global launch of the Infiniti luxury car brand. By region the Value-Up plan targeted the following sales increases:
- 250,000 units in North America;
- 150,000 in Japan;
- 70,000 units in Europe; and
- 350,000 units in the rest of the world.
Nissan will launch nine all new models during FY 2006/07 as part of Value-Up including the all new Altima, Sentra and Infiniti G35 sedan in the United States.
The automaker will also continue with the global expansion of its Infiniti luxury brand, which launches in Russia in September. The Infiniti will then be launched in China in 2007 and Europe in 2008. Nissan has further announced plans to invest US$200 million in a new car plant in Russia that is due to start production in 2009.
Nissan is forecasting another record net profit of ¥523 billion in FY 2006/07, representing marginal growth of 0.9% on its FY 2005/06 performance of ¥518 billion. Consolidated net revenue is expected to rise by 6.9% to ¥10.1 trillion from ¥9.4 trillion in FY 2005/06. Operating profit is expected to rise by 0.9% to ¥880 billion from ¥871.8 billion in FY 2005/06.
Ghosn cited rising raw material prices, rising energy prices and volatile exchange risks as the main downside risks for Nissan in FY 2005/06. Nissan is assuming foreign exchange rates of ¥110:US$1 and ¥135:1 euro representing a strengthening of the yen from the average foreign exchange rates of ¥113.3:US$1 and ¥136.9:1 euro posted in FY 2005/06.