Nissan became the latest automaker to offer up positive news while reporting its latest quarterly earnings result, albeit the good news isn’t a profit, but a significantly smaller loss than predicted.
The second-largest Japanese automaker reported a record operating loss of $3.2 billion for its second quarter, which was 28% better than the company forecast earlier. Strong sales in China, which is farther along in its recovery from the COVID-19 pandemic than the rest of the world, plus improving sales in the U.S. helped cut into the operating loss. Sales in China rose 4% during the quarter, including 12.8% in September.
The company’s revenues dropped as well, falling to $18.2 billion from $25 billion during the year-ago period. Overall, through the first six months of fiscal year 2020, Nissan’s revenue has fallen 38.1% while profits have shifted to significant losses in the interim with its operating margin moving from 0.6% down to a -5.1 percent.
However, Nissan’s CEO Makoto Uchida said the company’s recovery plan, Nissan NEXT, is having positive impact on the company’s bottom line. Currently, the focus centers on three points:
- Improving quality of sales by focusing on retail sales, lowering incentives and improving revenue per unit;
- Reducing inventory levels between Nissan and dealers; and,
- Reducing fixed costs and optimizing costs across business operations
Officials noted it expects to reduce fixed costs by 300 billion yen by the end of FY 2020. Additionally, the company added to its liquidity to help it through the pandemic and its restructuring plans, issuing $8 billion and 2 billion euros in debt, and had a 2 trillion yen credit line with lenders.
“Going forward, we will continue to strengthen our efforts to rationalize the business, while enhancing our product capabilities and refreshing our product lineup to provide unique value to our customers,” Uchida said in a release.
“While continuing to operate in an uncertain environment in the second half of the fiscal year, we will maintain the momentum from the second quarter with further financial discipline and improvement in our quality of sales. As an important milestone under Nissan NEXT, we will firmly pursue our aim towards achieving 2% operating margin in fiscal year 2021.”
As a result of the better than expected news, Nissan revised its earnings forecast, predicting a full-year operating loss of 340 billion yen compares with the 470 billion-yen loss it forecast three months ago. It also raised is global sales forecast to 4.165 million vehicles compared with 4.13 million earlier. However, that’s still a significant drop from last year’s 4.93 million vehicles.
The company also plans to launch 12 new vehicles, including the most recent debut of the new Rogue as well as a compact car for the Japanese market.