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Nissan Expects 2017 Profits to Fall 7.7 Percent

Automaker says fall will come despite higher vehicle sales than 2016.

by on May.11, 2017

Jose Munoz, Nissan's chief performance officer, said company expects operating profits to fall 7.7% for 2017 due to currency issues and rising material costs.

Despite the fact that Nissan expects to sell more cars this year than it did last year, executives predict the automaker’s operating profits will fall 7.7% for 2017.

Japan’s second-largest automaker said rising raw material costs and unfavorable exchange rates are the primary drivers behind the loss. The company predicted its global sales will increase 3.6% this year, including a 1.2% jump in its largest market, the U.S., to 5.83 million units.

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Overall, it also expects to keep its worldwide market share target at 8% for the near future despite the changes in the U.S. market. Officials said it should remain at 6.2% as it was last year. If you add in sales from its alliance partners Renault and Mitsubishi, sales will be about 10 million vehicles.

Nissan has been hit by the ongoing shift from cars to trucks and sport-utilities. The company’s long-been known for its affordable sedans, but the drop in gas prices to historic low levels has altered the U.S. buyers’ preferences.

(Toyota earnings tumble 21%. Click Here for the story.)

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

Though it will sell more vehicles in the U.S. in 2017, the growth rate is slower. Despite that, the company expects a positive impact from new versions of its Rogue crossover SUV and its Titan pick-up truck which hit the market this year.

(US auto sales fall hard in April. Click Here for the story.)

The company’s expanding line-up will help it compete with some makers, like Toyota, it’s still well behind the variety of offerings from U.S. automakers in the truck, crossover and utility segment.

Nissan expects operating profit to come in at 685 billion yen ($6 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, and down from a 742.2 billion yen profit posted in the year just ended, according to Reuters.

(To see more about Renault-Nissan’s plans to be king of the global hill, Click Here.)

The strengthening yen is eating into the company’s bottom line. Nissan’s forecast is based on the yen averaging 108 yen to one U.S. dollar. It’s currently at about 114 yen to the dollar. Additionally, higher raw material costs are expected knock profits down by 90 billion yen.

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