U.S. woes halve Nissan Q1 but outlook unchanged

Nissan Motor Co posted a much-worse-than-expected 46 percent drop in quarterly operating profit on Friday due to a severe downturn in the U.S. market, but stuck to its annual forecasts, counting on a weaker yen.
Nissan, controlled by Renault SA, is already forecasting its lowest operating profit in seven years due to a weaker dollar, high raw material prices and sinking U.S. demand.
Analysts think a downward revision will follow eventually, as a sales slowdown in the United States, Nissan's biggest market, has deepened in recent months due to a collapse in demand for gas-guzzling vehicles.
That forced Nissan, Japan's No.3 automaker, to take a provision of 42 billion yen ($390 million) in the April-June quarter as resale values slide for vehicles in its leasing business. Leasing accounts for just over one-fifth of Nissan's U.S. sales volume. Nissan's first-quarter operating profit fell to 79.95 billion yen, against an average estimate of 101.9 billion yen in a Reuters poll of nine brokerages.
Net profit fell 43 percent to 52.8 billion yen on revenues of 2.347 trillion yen, down 4.1 percent.
"This really isn't very good," said Takeshi Osawa, a senior fund manager at Norinchukin Zenkyoren Asset Management.
"And given the way the market is at present — responding very quickly to bad news — it is likely to spark (share) selling," he said, adding that the chance of a profit warning would likely rise as the year progresses.
Mitsushige Akino, chief fund manager for Ichiyoshi Investment Management, said he expected a downward revision in the annual outlook in three months' time.
"The market in North America is difficult, and unless there are huge changes in oil prices or exchange rates, it's only going to get more difficult," he said. "I was expecting a downward revision from Nissan, so I was slightly surprised."
For the year to the end of March 2009, Nissan kept its forecast for an operating profit of 550 billion yen and net profit of 340 billion yen, both down 30 percent from last year.
It kept its assumptions for the dollar and euro to average 100 yen and 155 yen this year, against current rates of around 107 yen and 167 yen. Nissan says every 1 yen change in the dollar affects its operating profit by 14.5 billion yen.
Consensus forecasts from 18 brokerages call for an operating profit of 586 billion yen and net profit of 364 billion yen.