Nissan profits fall on rising costs, forex woes

Tokyo: Japanese automaker Nissan reported a drop in first quarter profits Thursday, under pressure from rising material costs and a higher yen.

Nissan said sales were up in China in the three months to June, but fell in North America and Europe.

The firm’s quarterly net profit in the period dropped 14.1 percent to 115.8 billion yen ($1.05 billion).

Operating profit was down 28.8 percent to 109.1 billion yen, with sales also down slightly to 2.7 trillion yen.

Unit sales fell in the US, and development costs rose during the quarter, said Joji Tagawa, corporate vice president.

“That was offset by increased sales in other regions and efforts to reduce procurement costs,” he told a press conference.

“But it was not enough to offset the rising prices of raw materials, which we have been seeing since last year, and the negative impacts of currency exchange rates. We saw falling income and falling profits as a result,” he said.

While US tariffs on steel and aluminium, and threatened tariffs on automobiles, have roiled markets and upset trade relations, Tagawa said the firm saw little impact.

It “was not zero” but was minimal, he said.

“We have long made efforts to localise production around the world. This has proven to be an effective way to avoid trade problems, forex problems and changes in local demand,” he said.

Nissan maintained its annual forecasts, with net profit forecast at 500 billion yen.

Operating profit is expected at 540 billion yen on annual sales of 12 trillion yen.

Nissan in May warned that a strong yen was likely to affect its bottom line, and analysts said Japan’s auto industry as a whole was facing hard times.

“For the past fiscal year, Japanese carmakers enjoyed US tax cuts, which boosted their bottomline profits, but they can’t expect that for the current year,” Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm, told AFP before the results.

“Japanese carmakers need to step up their investment in new technologies, such as self-driving systems, in order to compete with their global rivals, while growing costs of row materials are pressuring their earnings.”

Nissan has struggled to recover trust after an inspection scandal last year, and suffered a new blow when it acknowledged earlier this month that data on emissions and fuel economy had been deliberately “altered.”

But it said the alterations only involved just over 1,100 vehicles, and none of its models would be subject to recall, tempering fears of another scandal.