Nissan 2007 Q3 Profits Rise On Increase Sales

Nissan has announced its financial results for the third quarter of its fiscal year (FY) 2007/08 period which has seen a strong rebound over the month, while the year-to-date (YTD) was maligned by a fall in net earnings. Sales revenues during the third quarter increased by 18.2% year-on-year (y/y) when measured against the results published a year ago, hitting ¥2,770.1 billion (US$26.0 billion). This increase was reflected by the gains made in its profitability as operating income hit ¥211.9 billion, up from ¥183.1 billion, while net earnings have risen 26.6% y/y to ¥132.2 billion. As a result of this progress, sales for the nine months ending 31 December have also expanded positively, increasing by 13.9% y/y from ¥7,834.6 billion to ¥6,877.2 billion, with operating income growing from ¥579.1 billion to ¥531.7 billion. However, net income over the three quarters has slipped by 9.0% y/y to ¥344.6 billion.

On a regional basis, North America has remained the largest market for Nissan vehicles during the quarter, with the number sold growing by 6.7% y/y to 333,000 units and resulting in sales revenues of ¥1,078.9 billion (+3.1%), but a fall in operating profits of 27.5% to ¥60.0 billion. This in turn caused the region's YTD operating income to go in to decline, falling 6.3% y/y to ¥191.1 billion, despite unit sales rising from 966,000 units to 1.005 million and revenues increasing to ¥3,064.4 billion (+6.5%). The second largest unit sales region for the automaker is Japan, although this is being hotly pursued by Europe. Its domestic market has seen declines for Nissan, although this has been stemmed recently having fallen by 0.9% y/y in the quarter to 147,000 units against a YTD decline of 3.8% y/y with a total of 479,000 units. This has not stopped the region being profitable however, as sales revenues have risen in the past three months by 15.0% y/y to ¥1,344 billion and an increase in operating income of 26.4% y/y to ¥104.9 billion, both of which have put a positive spin on its YTD results with revenues of ¥3,594.7 billion (+6.9%) and operating earnings of ¥226.2 billion (+4.4% y/y). Europe has seen the greatest growth for Nissan outside its developing markets as its third-quarter unit sales have increased by 12.5% y/y to 148,000 units, as the YTD ended up 11.2% y/y at 452,000 units. Consequently, this has been one of the most lucrative areas for growth at Nissan, as sales revenues in the three months expanded by 62.5% to ¥616.6 billion, and that added to the sales revenues for last nine months that eventually reached ¥1,698.4 billion (+44.2%). Operating profits in the region rose by 87.9% y/y to ¥25.7 billion and 61.5% y/y to ¥65.5 billion respectively. Strong gains also continue to be felt elsewhere around the world by Nissan, as in the YTD the number of vehicles sold hit 778,000 units, an increase of 22.9% y/y, with revenues growing even more strongly at 37.9% y/y to ¥2,067.3 billion and operating income reaching ¥111.0 billion, an increase of 41.4% y/y.

Outlook and Implications

The company has had a positive return to form this quarter compared to a year ago and the quarters following. The automaker has benefited from a string of new models launched over the past nine months including the Livinia multi-purpose vehicle (MPV), Altima coupé, Atlas F24 light commercial vehicle (LCV), the Aprio (which is a version of the Renault Logan built in Mexico), GT-R sports car, and Infiniti EX, X-Trail and Rogue sports-utility vehicles (SUVs). These have seen a surge in sales in some markets and kept other markets from seeing further declines. The Rogue, with its similar Qashqai and Dualis models, has been one of the most significant models for Nissan with demand far outstripping supply and causing Nissan to announce that it would move production of the Dualis from its plant in Sunderland (United Kingdom) to Japan to free up capacity. Despite this move, Nissan has still had to add another shift to its U.K. facility to serve the ongoing demand for this model (see United Kingdom: 1 February 2008: Nissan to Add Third Shift at U.K. Plant on Qashqai Success). Nissan will be hoping that the success of this vehicle will continue and that it may find similar successes from new niche models that are on the way, such as the Murano SUV, the second generation of which will hit the market by 31 March 2007.

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