Yokohama: Nissan Motor chief executive Carlos Ghosn said he expected the automaker’s operating margin to return to pre-crisis levels of around 6-7% in the not-too-distant future as China, Russia and other emerging markets contribute more to its earnings.
Nissan, held 43% by Renault SA, announced on Wednesday a vastly improved balance sheet and a return to the black for the year ended 31 March, but offered what analysts said was a conservative outlook for the new year.
Assuming a stronger yen against both the dollar and euro — at ¥90 and ¥120, respectively — Nissan forecast an operating profit of ¥350 billion ($3.75 billion) for the 2010-11 business year, for a profit margin of 4.3%.
That is down from a peak of 11-12% several years ago, Ghosn said, but added it was “not so bad” considering the depressed US market and unfavourable exchange rates last year.
“I think the Japanese makers will come back to a high level of profit no matter what happens in the US because part of their profit will be coming from China...Russia...India... and South America,” Ghosn, who also heads Renault, told reporters at Nissan’s headquarters in Yokohama, south of Tokyo.
“Particularly for Nissan, the potential for profit in the midterm is big,” he said, citing its aggressive expansion plans in China, Russia and India in the near term.
“Last year we were at 4% (operating margin) with the US market at 10.7 million cars and the yen at 93 (to the dollar.) You can make a quick calculation that 6 or 7% is not something that is really very far in the horizon.”
He added that he believed current exchange rates with the dollar around ¥93 would not last long because he saw no “superior advantage” in Japan over the United States or Europe.
“It should come back to something more towards the historic levels of around ¥100 or ¥110 ,” he said.
Ghosn stressed, however, that uncertainty over raw materials prices and vehicle pricing made it impossible to say whether Nissan’s annual guidance was overly cautious.
But in the medium to longer term, Ghosn said he was optimistic about Nissan’s growth prospects, with expansion plans in place in China, Russia, India and elsewhere, as well as into the uncharted electric car segment, which it wants to lead.
Nissan is now the best-selling Japanese brand in China, the world’s biggest auto market, when including its light commercial vehicles, and Ghosn said sales are being held back only by insufficient production capacity.
“We may have to take an additional decision on increasing capacity,” Ghosn said.
Nissan’s local joint venture with the Dongfeng Motor Group has already announced plans to expand annual capacity to 1 million vehicles a year by 2012 from 670,000 units now. Ghosn said he would gauge the Chinese market’s growth this year before making any decisions on when and how much to add capacity.
Nissan has forecast an 8% rise in global sales to 3.8 million vehicles this financial year, which would catapult it above Honda Motor Co as Japan’s second-largest carmaker based on their respective sales plans.
Nissan’s shares slipped 1.3% on Thursday, bucking a rise in other Japanese auto stocks and the broader market.