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. Last Updated: 07/27/2016

Nissan Shares Up Despite Loss




TOKYO -- Shares in Nissan Motor Co. surged nearly 7 percent Monday, bucking overall weakness in the Tokyo stock market after the Japanese automaker announced a better-than-expected profit outlook.


Nissan, undergoing one of the most drastic restructurings in Japanese corporate history, Friday posted a $6.3 billion net loss in the year just ended - one of the biggest losses ever recorded by a nonfinancial company.


But Japan's third-largest carmaker also said group operating profit in the business year that began April 1 will rise by just over one-third to 110 billion yen ($1 billion) on mostly flat sales of around 6 trillion yen. That exceeded the average forecast of analysts for 90 billion yen operating profit this year, according to First Call/Thomson Financial.


Shares in the automaker - which is 36.8 percent owned by France's Renault SA - closed at 540 yen Monday, up 6.72 percent. In contrast, the market benchmark Nikkei average slid 2.8 percent to 16,386.01.


Nissan's losses, however, widened to 684.4 billion yen on a consolidated basis in the fiscal year that ended March 31, as the company erased outstanding pension liabilities, adopted new accounting practices and moved to close plants and cut employees.


All of those steps were part of the painful overhaul Nissan has undertaken with the tutelage of a team of executives dispatched from Renault SA of France, which purchased a 37 percent stake in Nissan in March 1998 and effectively controls it.


That one of Japan's mightiest companies has moved decisively to address its problems squarely in hopes of rebuilding a sound and profitable business has excited investors not only about Nissan but also about other parts of Japan Inc.


But even though Nissan is not alone in its problems, few other companies here have swallowed the bitter medicine that Nissan is quaffing,


In the last fiscal year, Nissan took 711.1 billion yen, or $6.6 billion at current exchange rates, in nonrecurring charges. It wrote off some $3 billion of pension liabilities, began taking steps to close five plants, assigned more realistic values to real estate and securities holdings, and adopted new accounting standards aimed at bringing the company closer to international practices.


It sold assets and reduced debt, bringing its interest expenses down 30 percent. Some 6,500 jobs were eliminated through a combination of asset sales and early retirement. Purchasing costs were pruned 8 percent, as roughly 20 percent of the company's suppliers were dropped and the rest were forced to come up with savings of at least 20 percent.


And late in the fiscal year, the shock therapy started to pay off. Analysts were predicting that at best Nissan would eke out some 40 billion yen in operating profits because the company issued a surprise profit warning Feb. 2.


Warnings aside, it managed to produce operating earnings of 82.6 billion yen, which Carlos Ghosn, the company's president and chief operating officer, contended was a result of the acceleration of Nissan's restructuring plan.


"The revival plan is going faster and cutting deeper than planned," he said.


To be sure, the company has not yet staged a turnaround. While operating profits were better than expected, they were still down 31.7 percent.


Most alarming was the 10.5 percent slide in sales, which fell to 5.97 trillion yen, or $55.3 billion, from 6.6 trillion yen in fiscal 1998.


Ghosn contended that while lower, the sales in fiscal 1999 were more profitable than in the previous year because fewer incentives were deployed to attract customers.


In the current fiscal year, the company expects sales to rise 2.1 percent.


It expects net profits of at least 60 billion yen, 40 billion of which will come from Nissan's operations and the rest from asset sales. "We will be profitable next year," Ghosn said.