Japan’s Nissan Motor Co on Thursday posted a bigger-than-expected fall in quarterly operating profit, as a rise in marketing and selling expenses, which include sales incentives, offset a rise in global vehicle sales. It maintained its forecast for a drop in full-year profit, as it braces for a possible downturn in the U.S. auto market, the biggest single market for Nissan and many of its compatriots, following years of strong sales.
Japan’s No. 2 automaker by car sales posted an operating profit of 153.3 billion yen ($1.38 billion) in the April-June quarter, down 12.8 percent from 175.83 billion yen a year ago. That compared with an average estimate for 171.45 billion yen from six analysts polled by Thomson Reuters I/B/E/S. Nissan expects an operating profit of 685.0 billion yen in the year to March, down 7.7 percent from last year and below analyst forecasts for 733.23 billion yen. The company has said it expects higher raw material costs and a minor negative currency impact to weigh on operating profit this year.
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Nissan’s global retail sales rose 5 percent from a year ago to 1.35 million units, largely boosted by a jump in sales in Japan, China and the United States. Amid fierce competition in a slowing U.S. market, Nissan has been battling for market share in part by offering aggressive discounts, that some analysts warn may sting its margins. According to industry experts, spending on incentives accounts for about 15 percent of Nissan’s average U.S. vehicle sale price, higher than around 12-13 percent by U.S. automakers.
Higher raw material costs also weighed on the automaker’s operating profit during the quarter. Nissan shares ended up more than 1 percent before the earnings announcement, versus the broader market that was up a slight 0.2 percent. ($1 = 111.2000 yen)