May 11, 2017 / 7:14 AM / a year ago

UPDATE 3-Nissan forecasts profit fall, catch up in U.S. truck market

* Sees yen at 108 vs U.S dollar

* Expects to have trucks-car mix of 60:40 in main U.S. mkt (Adds impact of Calsonic Kansei stake sale)

By Naomi Tajitsu

TOKYO, May 11 (Reuters) - Nissan Motor Co forecast an unexpected 7.7 percent fall in operating profit this year on higher raw material costs and a negative currency impact, as it adjusts to changes in the U.S. market, its biggest, where larger vehicles are in demand.

Nissan and other Japanese automakers are scrambling to offset slackening demand for their traditional mainstays, sedans, in the key U.S. market by boosting supply of higher-margin sports utility vehicles (SUVs) and trucks.

They are betting that even as overall U.S. vehicle demand ebbs, drivers will continue to buy the larger models, given historically low U.S. gasoline prices.

Nissan, Japan’s second-largest automaker, expects a 1.2 percent lift in U.S. vehicle sales this year. While it expects sales growth to slow from last year, it sees a positive impact from new versions of its popular Rogue crossover SUV and its Titan pick-up truck which hit the market this year.

“We moved from being typically a 60 percent car and 40 percent truck company to 50-50 (in our offerings). We’re on our way to 60 percent trucks and 40 percent cars to adjust to the market,” Chief Performance Officer Jose Munoz told a results briefing on Thursday.

While a wider product line will bring Nissan’s sedan/truck ratio roughly in line with bigger rival Toyota Motor Corp , Japanese automakers still lag U.S. automakers in their light truck offerings, given that General Motors and Ford Motor Co get around 75 percent of their U.S. sales through trucks.

Many automakers also expect to deepen discounts on their sedans and SUVs to stay competitive, raising industry concerns about a possible pricing war which may sting profitability.

On Wednesday, Toyota forecast operating profit for the current year to slide by a fifth due to increased spending to push U.S. sales, along with the lingering impact from a stronger yen.


Nissan expects operating profit to come in at 685 billion yen ($6.0 billion) in the year to March, lower than an average estimate of 778.4 billion yen from 21 analysts polled by Thomson Reuters I/B/E/S.

The automaker posted an operating profit of 742.2 billion yen last year, which includes a one-off benefit from the sale of its stake in parts supplier Calsonic Kansei. Excluding that benefit, operating profit came in at 699.7 billion yen, and on that basis it forecasts a smaller, 2.1 percent slide in operating profit this year.

The forecasts are based on a projection that the yen will average 108 yen to the U.S. dollar this year, stronger than Thursday’s level of around 114 yen. Fluctuations in currencies including sterling and the Canadian dollar would shave 60 billion yen off operating profit, the company said, less than last year’s 282 billion yen currency hit.

Higher raw material costs are expected to weigh on profit by 90 billion yen, while R&D investment will knock 35 billion yen from its bottom line this year as it sustains investment in developing automated driving functions and lower-emission vehicles.

Overall, Nissan is forecasting global retail vehicle sales to come in at 5.83 million vehicles, up 3.6 percent from last year. Combined sales with automaking alliance partner Renault and Mitsubishi Motors Corp, in which Nissan holds a controlling stake, will hit roughly 10 million, making the group one of the world’s top-selling automakers.

Nissan said it would retain its 8 percent target for global market share and operating margin in its next mid-term plan, after achieving a global market share of 6.2 percent and an operating margin of 6.9 percent last year.

Nissan CEO Hirohito Saikawa, who took over from Carlos Ghosn in April, said the victory of Emmanuel Macron in this week’s French presidential election was positive for Nissan which has an 18-year alliance and cross-shareholdings with Renault. Macron “understood” and “valued” the alliance structure, he said.

A power struggle between the French government and the automaker alliance erupted in 2015 when the government raised its stake in Renault under then-Economics Minister Macron. The ensuing boardroom crisis led to new Renault-Nissan shareholder pacts at the end of that year. ($1 = 114.1200 yen) (Reporting by Naomi Tajitsu; Editing by Muralikumar Anantharaman and Mark Potter)

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