Nissan expects 38% full-year profit rise on stronger sales outlook

By Daniel Leussink

TOKYO (Reuters) -Nissan Motor Co on Thursday flagged a better-than-expected 38% rise in profit this year on stronger sales, a rosier outlook for the Japanese automaker as it retools its often difficult alliance with Renault (EPA:) and faces headwinds in China.

The bullish forecast, which comes as Nissan (OTC:) is pushing to turn itself around after years of turmoil, was based on expectations of almost 30% sales growth in both North America and Europe. However, in the key Chinese market the forecast was far less upbeat, at just 8%.

Nissan, like other global automakers, is facing intense pressure in the world’s largest auto market, where nimble local players are posing an increasing challenge thanks to a rapid roll-out of battery-powered electric vehicles (EVs).

The speed of change in the Chinese market now far exceeds what Nissan had previously expected, chief executive Makoto Uchida told an earnings briefing.    The automaker needs to “break away” from conventional methods and shift to a more flexible structure to respond better, he said.

Nissan is now seeing that the switch to EVs in China comes from consumers themselves and is not just driven by issues such as incentives and number plate restrictions, Chief Operating Officer Ashwani Gupta said at the briefing.

The company has to speed up the way it designs, manufactures and sells cars in China, he added.

Nissan sees operating profit rising to 520 billion yen ($3.85 billion) in the financial year that started last month, compared with an average profit forecast of 396.21 billion yen in a poll of 19 analysts by Refinitiv. That would also be a big jump over a 377 billion yen profit in the year just ended.

The improved sales outlook is driven by expectations to sell 29% more cars in North America, or 1.32 million vehicles, and 27% more in Europe. In China, Nissan expects volumes to rise 8% to 1.1 million vehicles.

A positive contribution to the upbeat forecast also comes from a better outlook for materials prices. That, in turn, will help offset pressure from a stronger yen.

Nissan is developing growth plans in areas such as software and EVs independent of Renault, sources have said, as the two companies work to finalise the terms of their rebalanced alliance by mid-year.

Nissan’s operating profit for the three months ended on March 31 came to 87.4 billion yen, versus the 89.81 billion yen average forecast in a poll of 11 analysts. It also compares to a 56 billion yen profit in the same period a year earlier.

($1 = 135.0500 yen)