Nissan: Reducing global production capacity by 600,000 units and headcount by 12,500 persons

Operating profit for Q1 2019 decreased by 98.5% to JPY 1.6 billion

2019/08/15

Summary

IMQコンセプト
IMQ concept with e-Power, to be launched in Europe by 2022, and then other regions (unveiled at the Geneva Motor Show 2019)(All information in this report is from the Nissan Motor Co., Ltd. corporate website)

In July 2019, Nissan announced its consolidated financial results for the first quarter (Q1) of FY 2019 (April to June), as well as its Business Transformation initiative. In the April to June period, net revenue decreased 12.7% YoY to JPY 2,372.4 billion, and operating profit decreased 98.5% to JPY 1.6 billion at an operating profit margin of 0.1%. Nissan's consolidated financial results for Q4 of FY 2018 are as follows: Net revenue decreased by 12.5% (JPY 2,995.8 billion), operating profit decreased by 97.8% (JPY 4.5 billion) at an operating profit margin of 0.2%, and operating profit has fallen by more than 90% for two consecutive quarters.

In the FY19 Q1 fiscal period from April to June 2019, global sales volumes declined 6.0%, and wholesale sales volumes, excluding China, fell significantly by 13.5%. Although there was some optimization of Nissan dealer inventory levels by 68,000 units, Nissan profitability fell under intense pressure. From the second half of fiscal 2019, Nissan expects sales volumes and profitability to recover with the introduction of new products.

As for the company’s future efforts, Nissan will be taking a hardline approach to selecting unprofitable operations that are placing downward pressure on profitability. And, rather than short-term sales bursts with short-term benefits, Nissan plans to make steady efforts to recover sales in two years if possible and restore profitability. The financial targets that Nissan has established are not unrealistic. Under the ongoing Power 88 midterm plan, Nissan is in the process of transforming its business to achieve revenues of JPY 14.5 trillion in FY 2022 (forecasting JPY 13 trillion in FY 2019), global sales volumes of 6 million units (5.5 million units in FY19), and an operating profit margin of 6.0% (on a proportionally consolidated basis).

To meet these goals, Nissan will optimize its operations and the efficiency of its investments by reducing its production capacity by 600,000 units and headcount by 12,500 persons to improve profitability by JPY 300 billion by FY 2022. Also, with the steady growth of new products and new technologies under the Nissan Intelligent Mobility vision, the company will increase revenue from JPY 13 trillion to JPY 14.5 trillion and improve profitability by JPY 180 billion. Nissan is currently forecasting an operating profit of JPY 390 billion for FY 2019. With its business transformation initiative, Nissan plans to add “JPY 300 billion + JPY 180 billion” (optimization of operations and investment efficiency improvements + steady growth) in operating profit to achieve an operating profit of JPY 870 billion at on operating profit margin of 6.0% by the end of FY 2022.

In addition, about 40% of the "JPY 300 billion + JPY 180 billion" in increased profitability will be generated by improvements made to its U.S. operations. Nissan is targeting to limit the number of vehicles it sells in the U.S. sales to a modest increase from the 1.35 million units projected in FY19 to 1.4 million units by FY 2022. At the same time, Nissan aims to increase the number of retail sales (not fleet sales) in the U.S. by 100,000 units. And, if this increase is realized, Nissan believes that this will demonstrate that its brand power has recovered.


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Japanese OEM FY2018 Financial Results: 1.9% increase in sales, 11.5% decrease in operating profit(Jun. 2019)