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Nissan Reports First Quarterly Loss Since 2009 as U.S. Sales Slump

By John Rosevear - Feb 17, 2020 at 3:34PM

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The new CEO's recovery plan might not be enough.

Japanese automaker Nissan Motor (NSANY 0.01%) posted a net loss of 26.1 billion yen ($239 million) and a 78% decline in operating profit in the quarter that ended on Dec. 31, as its new CEO outlined a plan to return to growth in the crucial U.S. market. 

Nissan also cut its guidance for the fiscal year that will end on March 31. 

The loss was Nissan's first quarterly net loss since the April-to-June quarter of 2009, when the auto industry was reeling in the midst of the global economic crisis. 

A red 2020 Nissan Rogue, a compact crossover SUV.

The compact Rogue SUV is Nissan's biggest seller in the U.S., but sales were down 15% in 2019. Image source: Nissan Motor.

The raw numbers

Like many Japanese companies, Nissan uses a fiscal year that begins on April 1 and ends on March 31. The quarter that ended on Dec. 31 was the third quarter of Nissan's 2019 fiscal year.

Metric Q3 FY2019 Change vs. Q3 FY2018
Revenue 2.504 trillion yen (17.8%)
Vehicles sold (thousands) 1,195 (10.8%)
Operating profit 22.7 billion yen (78%)
Operating profit margin 0.9% (2.5 pp)
Net income (loss)  (26.1 billion yen) 96.5 billion yen lower

Data source: Nissan Motor. As of Feb. 17, $1 = about 110 yen. Pp = percentage point. 

What happened at Nissan in the quarter? 

Nissan has a new CEO: Former China chief Makoto Uchida took the company's helm on Dec. 1, following the ouster of longtime CEO Carlos Ghosn amid a series of financial scandals. 

Here's a look at how each of the company's regional business units performed:

  • Japan posted an operating profit of 18.3 billion yen, down 68% from the year-ago period, as sales fell 19.8% to about 100,000 vehicles following a tax increase and damage caused by typhoons.
  • North America generated operating profit of 21.6 billion yen, down 26.6% from a year ago, as sales declined 16.7% to about 404,000 vehicles. Nissan is dealing with an aging product portfolio in the U.S. market and has been working to reduce dealer inventories. Nissan's operating margin in North America was just 1.6% in the quarter, down from 2.5% a year ago. 
  • Europe posted an operating loss of 4.4 billion yen, versus a loss of 7.3 billion yen in the year-ago quarter, on an 8.1% decline in sales to about 130,000 vehicles. 
  • Asia (excluding Japan) posted an operating profit of 10.8 billion yen, down 56.1% from a year ago, on a 3.6% decline in sales to about 441,000. 

Nissan's plan to fix its U.S. business

In a presentation to investors, Nissan's chief operating officer, Ashwani Gupta, said the company's plan to improve profitability in the United States has three key components:

  • A shift in emphasis to quality of sales versus quantity of sales. Put another way, Nissan -- following most of its rivals -- will reduce its dependence on incentives in a bid to prioritize profitability over sales totals and market share. 
  • New products. The average age of Nissan's U.S. lineup is 5.2 years, Gupta said, older than all of its key rivals'. The company will launch eight new or redesigned products in the U.S. over the next two years, bringing that average age down to between three years and 3.5 years.
  • An effort to win broad support from its U.S. dealers for the changes, including increased marketing spending and improved bonuses for dealers that hit certain sales targets. 

Is it enough to put Nissan back in the black? It may not be: Globally, Nissan is struggling with underutilized factories and a sluggish product pipeline. These efforts will yield incremental improvements in the U.S. over several quarters, but I suspect that more drastic action will be needed to ensure that Nissan is sustainably competitive and profitable.

Looking ahead: Nissan cut its guidance again

Nissan again cut its guidance for the fiscal year that will end on March 31, 2020. For the full year, auto investors should now expect:

  • Sales of about 5,050,000 vehicles. (Prior guidance: 5,240,000. Fiscal 2018 result: About 5,516,000.)
  • Net revenue of about 10.2 trillion yen. (Prior guidance: 10.6 trillion yen. 2018: 11.57 trillion yen.)
  • Operating profit of 85 billion yen, with a margin of 0.8%. (Prior guidance: 150 billion yen with a 1.4% margin. 2018: 318.2 billion yen, with a margin of 2.75%.)
  • Net income of 65 billion yen. (Prior guidance: 110 billion yen. 2018: 319.1 billion yen.)
  • Exchange rates of 108 yen per U.S. dollar and 120 yen per euro. (Prior guidance: 107 yen per U.S. dollar and 120 yen per euro.) 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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