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Nissan Spending $3.5B on Share Buyback

Automaker looking to raise stock price with effort.

by on Feb.29, 2016

Nissan Chief Carlos Ghosn hopes to raise the automaker's share price with a $3.5 billion buyback of stock this year.

Nissan Motor Co. announced plans to repurchase $3.5 billion worth of its own shares before the end of 2016 to enhance return to shareholders, the company said in a statement.

“Return to shareholders is one of Nissan’s key objectives. We took this decision considering our financial status and outlook to continuously generate significant free cash flow,” said Carlos Ghosn, Nissan president and chief executive officer commented, adding the company was making an effort to balance the it’s financial strength and needs deriving from future business strategies.

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The move is expected to bolster the value of Nissan’s individual shares, which like those of other global automakers have lagged in recent weeks in the face of uncertainty about the overall health of the global economy.

Ashvin Chotai, managing director of Intelligence Automotive Asia in London. Nissan, told Bloomberg that after adding capacity in China, Mexico, Brazil and Thailand in the past few years, Japan’s second-biggest carmaker doesn’t have pressing investment needs, which frees up cash to buy back shares.

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“The price-to-earnings ratio is very low today and this is clearly a good time for them to reduce the number of shares outstanding,” Chotai told Bloomberg. “I’m encouraged to see it means that the company thinks their shares are undervalued now.”

Nissan has forecast its net income to rise to a record levels in the fiscal year March, ending March 31 thanks to record sales in the U.S.

Nissan sells more than 60 models under the Nissan, Infiniti and Datsun in six regions including, ASEAN & Oceana, Africa, Middle East & India; China; Europe; Latin America and North America.

Earlier this month, Nissan became one of the first global automakers to announce plans to build vehicles in Myanmar. It will begin assembling new cars there later this year, in partnership with Tan Chong Motor Group.

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Nissan will initially use an existing Tan Chong facility to assemble the Sunny compact sedan before transferring production to the new plant. The new site will have a work force of approximately 300 and a production capacity of 10,000 units at full production.

“Nissan is pleased to have the opportunity to be part of new motoring growth in Myanmar,” said Toru Hasegawa, corporate vice president of Nissan Motor Co., Ltd. and president of Nissan Motor Asia Pacific.

Nissan’s expansion in Myanmar forms part of the company’s wider growth in emerging markets, which includes production in countries including India, Brazil, Russia and Nigeria.

Demand in Myanmar is expected to grow rapidly following economic and political reforms in the country.

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Nissan started selling vehicles in Myanmar in 2013. Its portfolio currently includes the X-Trail sports utility vehicle, Altima sedan, Navara pickup truck, NV350 van and Civilian minibus. Local production will add the Sunny to the line-up.

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