Nissan recovers from the effects of the pandemic despite the chip crisis and triples its profit forecast

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Nissan tripled its full year net profit forecast on Tuesday as it rebounded from the effects of the pandemic with a strong quarterly performance, saying it would weather challenges like the chip crisis and rising commodity prices.

The Japanese auto giant has faced a slew of lawsuits in recent years, from weak demand to the aftermath of the arrest of former boss Carlos Ghosn, and its annual profits were last in the red in 2018-19.

But despite lower-than-expected sales volume so far this fiscal year, largely due to microchip shortages, “the quality of sales in each market continued to improve, resulting in higher unit earnings,” Nissan said.

The troubled company now expects net income of JPY 180 billion (approximately Rs.11,798 billion) through March 2022, compared to an earlier estimate of JPY 60 billion (approximately Rs.3,933 billion).

But it revised its full year revenue forecast from JPY 9.75 trillion (approximately Rs 6.39,150 billion) to JPY 8.8 trillion (approximately Rs 5.76,873 billion).

“Semiconductor shortages remain a challenge for the automotive industry,” Chief Operating Officer Ashwani Gupta told reporters.

“However, we expect our sales performance efforts … will more than make up for the volume decline resulting from these challenges.”

A shortage of semiconductors – a key component in modern automobiles – has slowed global auto production, with automakers’ problems being exacerbated by supply chain problems in pandemic-stricken Southeast Asia.

“What this crisis taught us is resilience and agility. We shouldn’t expect this crisis to be over and the new crisis is no longer there. Something new is going to happen,” added Gupta.

Nissan posted net income of JPY 54.1 billion (approximately Rs.2.546 billion) for the three months ended September, reversing a net loss of JPY 44.4 billion (approximately Rs.2.910 billion) for the same period last year when virus lockdowns hit the company and its rivals.

“Our strong results are the result of careful financial management, improved sales quality and an ongoing product offensive. This has helped us withstand multiple headwinds,” said CEO Makoto Uchida.

“On the road to recovery,” analysts said that despite the challenges, Nissan had a good chance of achieving its goals.

“Nissan is on the road to recovery,” said Satoru Takada, an auto analyst at Tokyo-based research and consultancy firm TIW.

“A return to the black is likely, and it is a goal that Nissan must achieve after two years of net loss, no matter what,” Takada told AFP before the results were released.

“But headwinds, including production cuts, remain strong,” he added.

Nissan’s French partner Renault said last month that it will produce around 500,000 fewer vehicles than expected this year due to the global shortage of electronic components, especially semiconductors.

Last week, rival auto company Honda posted a decline in net income in the second quarter and revised its annual earnings forecast downwards due to the chip shortage in part.

But Toyota, the world’s best-selling automaker, has raised its full-year earnings forecast after a strong quarter that weathered production cuts.

Even before the COVID crisis, Nissan was struggling with rising sales costs and the ongoing saga surrounding its former boss Ghosn.

The former auto magnate was arrested in Japan in 2018 and charged with the allegations of financial misconduct he denies, but jumped on bail and fled to Lebanon the following year.

He remains at large, but his former associate Greg Kelly and Nissan himself face trials in Japan.

Last month in a court of law, Kelly said he was “not guilty of any crime” and prosecutors asked for a two-year prison sentence.

The verdict will be announced on March 3rd.

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