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S&P places Nissan on CreditWatch Negative on potentially weak earnings

S&P Global Ratings on Oct. 18 placed Nissan Motor Co. Ltd.'s A- long-term issuer credit ratings and unsecured debt issue ratings on CreditWatch with negative implications, citing the likelihood of weaker earnings for the Japanese carmaker.

The rating agency also placed on CreditWatch Negative its A- issuer credit ratings on Nissan's overseas subsidiaries Nissan Financial Services Australia Pty. Ltd., Nissan International Finance (Netherlands) B.V., Nissan Motor Acceptance Corp. and Nissan North America Inc. and its A- long-term rating on debt that the subsidiaries have issued.

Ratings, meanwhile, affirmed the A-2 short-term ratings on Nissan and its overseas subsidiaries.

The agency said it placed the company on CreditWatch Negative to reflect its expectation that the business environment will remain difficult in some of the group's key markets, including the U.S., China and Europe. Ratings said auto sales have been declining in major markets such as North America and China, adding that a solid recovery in the near future is unlikely.

Ratings noted that Nissan has sought to reduce sales incentives, particularly in the U.S., as it works to improve its earnings. "However, cutting incentives while demand is weak could lead to a large drop in sales and further damage capacity utilization," the agency said.

The rating agency said it sees Nissan's profitability as weak relative to its global peers. Ratings said it continues to expect Nissan's EBITDA margin to fall to about 5.0% in fiscal 2019 ending March 2020 from 5.5% in fiscal 2018.

Rating said it plans to resolve the CreditWatch placements after reassessing the base-case earnings scenario for Nissan for fiscals 2019 and 2020. To do this, the agency said it would take into account Nissan's auto sales outlook, its attempts to restructure its business and the expected effects. The agency added that it will look into the impact of activities with Nissan's alliance partners Renault SA and Mitsubishi Motors Corp., as well as Nissan's management structure.

Earlier in October, Nissan replaced Hiroto Saikawa with its China head, Makoto Uchida, as the company's new CEO after the former admitted to being overpaid and witnessing a period of weak performance following the financial misconduct scandal involving former Chairman Carlos Ghosn.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.