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Japan-Update

Nissan sees lower profit, stronger yen, more expensive materials

CEO plays down impact of Macron's election on Nissan-Renault alliance

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Hiroto Saikawa, president and CEO of Nissan Motor, speaks during a news conference at the company's headquarters in Yokohama on May 11.   © Reuters

TOKYO --Nissan Motor on Thursday forecast net profit for the current fiscal year to fall 19.4% to 535 billion yen ($4.68 billion), citing expectations for a stronger yen and higher raw material prices. 

It said one-off gains from its sale of stakes in parts supplier Calsonic Kansei lifted net profit for fiscal 2016, which in turn led to a lower forecast for its fiscal 2017 net profit.

Japan's No. 2 carmaker sees revenue for the year through next March inching up 0.7% to 11.8 trillion yen and operating profit falling 7.7% to 685 billion yen.

It also expects to sell 5.83 million cars, 4% more than in fiscal 2016.

In North America, its largest market, Nissan sees sales edging up 0.5% to 2.14 million vehicles.

During a news conference, Nissan CEO Hiroto Saikawa said there are signs that U.S. vehicle sales are peaking and that his company must be cautious in terms of sales projections.

"However, I believe the fundamentals of the U.S. economy remain steady and see the American market remaining healthy," he said.

The carmaker's forecast is based on a projection that the yen will average 108 to the dollar in the year ending next March. The yen traded at around 114 to the dollar Thursday. In the 12 months through this past March, the yen averaged 108.3 to the greenback.

On Wednesday, Toyota Motor said it expects a second straight year of profit declines for the current fiscal year, partially due to slowing sales in the U.S. It took a cautious view on the foreign exchange rate, projecting 105 yen to the dollar.

Saikawa also played down any impact that the election of Emmanuel Macron as France's next president may have on the Nissan-Renault alliance.

Back in 2015, the French government of outgoing President Francois Hollande sought to deepen its involvement in Renault's management under the so-called "Florange law" of 2014, which doubles voting rights for long-term shareholders.

As the minister of the economy, industry and digital affairs, Macron led the Hollande administration in negotiations with Renault.

Nissan's then-CEO Carlos Ghosn strongly opposed the move, arguing it could lead to questionable management policies.

The squabble ended at the end of 2015 with the French government agreeing not to interfere in Nissan's management.

"In my opinion," Saikawa said, "I am glad with the results of the election. I think it's good for the stability of the EU, for the French economy and stable growth.

"Two years ago ... we engaged in deep talks with Macron and his team and discussed the purpose of the alliance. I think he understands the value of the alliance, and I think it makes our jobs easier to have someone like that as president."

Ghosn stepped down from CEO in February and passed the post to Saikawa so he could focus on Nissan's alliance with Renault and Mitsubishi Motors. Nissan bought a 34% stake in Mitsubishi Motors and is working to regain trust in a carmaker that got caught in a fuel economy scandal.

Earlier this week, Mitsubishi Motors' reported a 96.3% plunge in operating profit for fiscal 2016, or 5.1 billion yen, from 138.4 billion yen a year earlier. Falling sales, foreign exchange losses and the fuel economy scandal all weighed down the bottom line.

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