Nissan tips lower operating profit on stronger yen

Nissan Motor on Thursday said it expects operating profit in the current fiscal year to fall 10 percent due to a stronger yen, as a rise in the currency dampens the outlook for Japanese automakers.

The company's announcement came a day after its bigger rival Toyota warned that its annual net profit will fall by about a third as a robust Japanese currency and a slowdown in Chinese growth and other emerging markets dent its bottom line.

For the current fiscal year, Nissan forecast a net profit of 525 billion yen ($4.8 billion), about the same level from the previous year, but expects a 10.5 percent drop in operating profit to 710 billion yen due to "a negative foreign exchange " impact.

Sales are set to fall 3.2 percent to 11.8 trillion yen, it said.

Separately, Nissan said that it was throwing a lifeline to troubled Mitsubishi Motors, announcing plans to buy a one-third stake in the automaker for $2.2 billion to forge an alliance that will challenge some of the world's biggest auto groups.

Nissan's profit forecasts for the year to March 2017 were made under currency rate assumptions of 105 yen to the dollar and 120 yen to the euro.

That compared with an average rate of 120.2 yen to the dollar and 132.6 yen to the euro in the previous year, the company said.

The assumed exchange rates would have a negative impact of 255 billion yen, it said.

Shigeru Matsumura, analyst at SMBC Friend Research Center, said ahead of the announcement that Japanese automakers can't count on yen weakness to boost earnings during the current fiscal year.

They also face uncertainty surrounding how long auto demand in North America can remain strong, he added.

A stronger Japanese currency can burden automakers and other exporters as it makes their products more expensive abroad and can dent their overseas profits when calculated in yen terms.

For the fiscal year just ended in March, Nissan said it posted a net profit of 523.8 billion yen, up 14.5 percent from the previous year thanks to brisk sales in North America and Europe.

Sales rose 7.2 percent to 12.2 trillion yen and operating profit surged 34.6 percent to 793.3 billion yen.

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