Nissan's FY 2011/12 Net Profit Up 7%, Suzuki's Jumps 19%

Nissan today (11 May) announced its financial results for fiscal year (FY) 2011/12, which ended in March. Japan's second largest automaker by volume reported an almost 7% year-on-year (y/y) rise in its net profit to JPY341.4 billion (USD4.32 billion) and a modest 1.5% y/y increase in its operating profit to JPY545.8 billion on sales of JPY9.4 trillion, up 7.3% y/y. Nissan's global sales reached a record high of 4.845 million units during the year as it outperformed the overall auto industry. Unit sales of Nissan vehicles rose 15.8% from the previous year's 4.185 million units, whereas total industry volumes increased 4.2% to 75.7 million from 72.6 million units in FY 2010/11. Nissan's share of the global market rose 0.6 percentage point to 6.4%. For FY 2012/13, Nissan has issued forecasts based on foreign-exchange rates of JPY82:USD1 and JPY105:EUR1. The automaker expects a 17.2% y/y jump in its net profit to JPY400 billion and a 28.2% y/y jump in its operating profit to JPY700 billion on sales of JPY10.3 trillion, up 9.6% y/y.

Separately, Suzuki has reported a more than 19% y/y jump in its FY 2011/12 net profit to JPY53.9 billion, up from JPY45.2 billion a year earlier. The motorcycle and small-car specialist booked an 11.6% y/y rise in its operating profit to JPY119.3 billion on the back of cost cuts, even as its top line contracted 3.8% y/y to JPY2.512 trillion. The company predicts that a sales rebound will drive another solid performance this current FY as it expects its net profit to jump nearly 30% y/y to JPY70 billion on sales growth of 3.5% y/y to JPY2.6 trillion. Suzuki's outlook is based on average foreign-exchange rates of JPY75:USD1 and JPY105:EUR1. "Overseas, sales decreased year-on-year [in FY 2011/12] due to the impact of the yen appreciation, decrease of exports especially to Europe, and a sales decrease in India", Suzuki said in a statement.

Outlook and Implications

Both Nissan and Suzuki delivered strong performances in the just-concluded fiscal year considering the headwinds created by natural disasters, an over-valued yen, and uncertain global economic conditions. Both automakers fared better than their bigger rival Toyota, which saw its net profit slide more than 30% y/y last FY despite a fivefold jump in its fourth-quarter profit.

Nissan, which is owned 43.4% by Renault, recovered relatively quickly from a series of challenges last year, notably the Japanese earthquake in March and then record flooding in Thailand during October. Nissan, like other local automakers, scrambled to restore its parts supply chain in the aftermath of the earthquake and tsunami, which damaged factories of many of its suppliers in north-eastern Japan. The company, however, made up for the lost production incurred in March and April by operating at a higher-than-planned level in May, reiterating its plan to maintain domestic vehicle production at 1 million units during the FY (see Japan: 16 May 2011: Nissan to Maintain Annual Production Target in Japan Despite Disaster). Consequently, the carmaker was back to nearly normal output levels by late June, with full, uninterrupted production restored by October. Nissan's global production soared 15% y/y to a record 4.83 million vehicles in FY 2011/12. The automaker maintained its product launch schedule and market expansion strategy throughout the year, releasing five new models globally: the Tiida in China, the Lafesta Highway Star in Japan, front- and rear-drive versions of the NV400 commercial van in Europe, and the Infiniti JX in the United States. During the year, Nissan achieved other milestones—for instance, the Leaf became arguably the world's best-selling electric vehicle (EV) and it extended partnerships with other automakers including Daimler and Mitsubishi. This complemented its record sales in global markets; the company's sales rose 21.9% y/y to 1.25 million vehicles in China, its largest single market worldwide. In the United States, its sales were up 11.8% y/y to 1.08 million units. Across Europe including Russia, its sales were up 17.5% y/y to 713,000 units, while in Japan, its sales increased 9.2% y/y to 655,000 units. Sales in all other markets totalled 826,000 units, up 16.4% y/y. Going forward, Nissan plans to churn out 5.6 million vehicles worldwide this FY, up 800,000 units from last FY, in its quest to raise its global market share to 8% by FY 2016/17 as part of its medium-term business plan, "Nissan Power 88" (see Japan: 27 June 2011: Nissan Announces Mid-Term Business Plan, Aims to Achieve 8% Global Market Share by FY 2016/17). The target roughly translates into 7.6 million units, implying a yearly sales expansion of more than 500,000 units, which the automaker may find a bit tough to accomplish. Nissan intends to boost output mostly at plants abroad, especially in China, Mexico, and the United Kingdom. Since many are already running close to full capacity, the carmaker will seek to increase overtime work and run the factories on days they are normally closed. Its new plants are not slated to come onstream until around 2014. The automaker recently announced its plan to achieve a 5% y/y sales increase in Japan in the current FY, with a long-term goal to control 14% of its domestic market (see Japan: 25 April 2012: Nissan Aims for 5% Japanese Sales Growth in FY 2012/13, Plans to Revive Cima As Hybrid-Only Model).

Suzuki meanwhile enjoyed another successful financial year, propped up by cost cuts, even though its sales revenues declined owing to the yen's strength and a sales decline in its biggest market, India, where its subsidiary Maruti had to cope with a bitter and long, drawn-out labour dispute, compounded by rising fuel prices and interest rates (see India: 30 April 2012: Maruti Suzuki's FY 2011/12 Net Profit Dips 29% Y/Y, Plans to Raise Diesel Engine Production to 400,000 Units in 2012). The overall sales fall was mitigated somewhat by strong sales in Japan, up 5.3% on the year to a record JPY986.8 billion, as demand rebounded strongly in the second half of the year after the natural disaster in March. Suzuki's sales at home were also augmented by the Japanese government's reinstatement of tax breaks on purchases of low-polluting, eco-friendly vehicles until 2015. The automaker saw its sales jump 15.4% y/y in the non-minivehicle category and a robust 31% y/y in the minivehicle segment during the January-March quarter. Looking ahead, Suzuki, which is still in the middle of an unresolved court dispute over a soured tie-up with 20% shareholder Volkswagen (VW), is banking on a sales rebound in India, where it holds the biggest market share. The company is targeting a cautious 10% sales rise to 1.1 million vehicles in the country in the current FY. The best bet to achieve its newly issued targets would be to add a much-needed EV to its portfolio and expand its line-up of minivehicles in Japan, where total industry demand is expected to rise 19% y/y to 5.02 million vehicles this calendar year.