Nissan down, sees sharp 08/09 decline

By Chang-Ran Kim, Asia auto correspondent

TOKYO (Reuters) - Nissan Motor Co <7201.T> reported a 14 percent drop in fourth-quarter operating profit and forecast a sharp fall in annual profits this year due to a weaker dollar, rising commodity prices and sinking U.S. demand.

Japan's No.3 automaker, controlled by France's Renault SA <RENA.PA>, joins bigger domestic rivals Toyota Motor Corp <7203.T> and Honda Motor Co <7267.T> in flagging a tough year ahead although some investors said it could have been worse.

"Both the results and the outlook are not that bad, even compared with Toyota and Honda, and the stock will probably not fall because of this," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"The dividend payout ratio of 50 percent and the dividend payment of 42 yen are positive news," he added.

Nissan forecast operating profit to fall 30 percent to 550 billion yen for the year ending in March 2009, compared with analysts' consensus expectations for an annual operating profit of 652 billion yen.

(For a graphic on Nissan earnings click http://int1.fp.sandpiper.net/reuters/editorial/images/20080513/J PNSSN.gif

While ramping up sales in China, Russia and some other emerging markets, Nissan is being hit hard in the United States, its biggest market, where vehicle sales are seen edging lower to 1.057 million units this business year.

Demand for its ageing Titan pickup trucks and other bigger vehicles has slumped as consumers flock to smaller, more fuel-efficient cars at a time of record fuel prices.

Sales of its Versa subcompact and Rogue crossover cars are doing well, but not enough to prop up profitability.

January-March operating profit was 211.8 billion yen ($2.0 billion), slightly ahead of an average estimate of 204.8 billion yen in a Reuters Estimates poll of 20 brokerages.

That put its full-year operating profit at 790.8 billion yen, short of management's plan for 800 billion yen.

Fourth-quarter net profit rose 67.5 percent to 137.6 billion yen, while revenue fell 16.8 percent to 2.99 trillion yen.

Nissan has been hit by the rising value of the yen versus the dollar and said it expects the dollar to fall further to average 100 yen this year, diminishing the value of earnings made overseas. It sees the yen at 155 to the euro.

Rising prices of steel, platinum and other raw materials are also set to wipe out efforts at cost cutting.

Nissan announced a new roadmap for growth over the next five years, even as its three targets under the existing "Value-Up" business plan remain unachieved.

It is targeting 5 percent revenue growth on average over the period, supported by its planned launch of 60 all-new models and plans to expand its Infiniti luxury division, light commercial vehicles and global entry cars.

A year ago, Nissan said it would take an extra year to achieve its targets of posting a "top level" of operating profit margin among global automakers, total sales of 4.2 million vehicles and an average return on invested capital (ROIC) of 20 percent.

That was despite conservative currency rate assumptions for 100 yen to the dollar and 120 yen to the euro for the final two years of the plan.

While sales in Europe have been robust, driven by hit products such as the Qashqai crossover, intense price wars in the shrinking U.S. light trucks segment has forced Nissan to reduce production at two local factories.

Nissan expects its Canton, Mississippi and Smyrna, Tennessee plants to work four days a week instead of five through July.

Sales of Nissan's U.S.-built light trucks are down 34 percent so far this year, compared with a 1 percent rise for Toyota.

Shares of Nissan fell 24 percent in the year to Monday, worse than Tokyo's transport subindex <.ITEQP.T>, which lost 16 percent.

Before the results, Nissan shares ended up 3.2 percent at 960 yen.

(Additional reporting by Taiga Uranaka and Aiko Hayashi; Editing by Hugh Lawson)