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Operating margin to hit 6-7% soon: Ghosn

Operating margin to hit 6-7% soon: Ghosn
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First Published: Thu, May 13 2010. 09 40 PM IST

Positive forecast: Nissan Motor’s chief executive Carlos Ghosn. Toshiyuki Aizawa/Bloomberg
Positive forecast: Nissan Motor’s chief executive Carlos Ghosn. Toshiyuki Aizawa/Bloomberg
Updated: Thu, May 13 2010. 09 40 PM IST
Yokahama, Japan: Nissan Motor Ltd chief executive Carlos Ghosn said he expected the auto maker’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.
Positive forecast: Nissan Motor’s chief executive Carlos Ghosn. Toshiyuki Aizawa/Bloomberg
Nissan, held 43% by Renault SA, announced on Wednesday an 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 yen and 120 yen, respectively—Nissan forecast an operating profit of 350 billion yen ($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 mid term 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 6-7% is not something that is really very far in the horizon.”
He added that he believed current exchange rates with the dollar around 93 yen would not last long because he saw no “superior advantage” in Japan over the US or Europe.
“It should come back to something more towards the historic levels of around 100 or 110 yen,” 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 has forecast an 8% rise in global sales to 3.8 million vehicles this fiscal, which would catapult it above Honda Motor Co. Ltd as Japan’s second largest car maker based on their respective sales plans.
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First Published: Thu, May 13 2010. 09 40 PM IST