Nissan shares drop significantly after profit forecast cut image

Nissan, Japan’s second-largest automaker fell the most in around five years in Tokyo trading after the company trimmed down its profit forecast.

The stock dropped 10 % to close at 861 yen, the highest decline since December 2008. Nissan had the biggest slide in the Nikkei 225 Stock Average, which climbed 0.2 %. This comes just as the weaker yen is supposed to be supporting Japanese exporters’ earnings, but actually Nissan last week moved to lower its full-year net income prediction by 15 % after demand in emerging markets slowed and recall costs rose.

“The impression was really bad as the downward revision was even bigger than we expected,” said Koji Endo, an auto analyst at Advanced Research Japan in Tokyo. “They have to regain market confidence.”

Nissan cited unfavorable emerging-market exchange rates, such as the Indian rupee, in the outlook’s modification. The company also said new government policies in countries such as Thailand and Brazil are also among reasons that the company lowered its full-year global sales forecast to 5.2 million units, compared with an earlier expectation of 5.3 million.

Recall costs were another reason for the earnings revision. Nissan said on Sept. 26 it would recall 910,000 vehicles globally, including the Serena minivan and X-Trail SUV, over an accelerator glitch. The recall will cost the company about 15 billion yen ($152 million), lowering the company’s quarterly profit.

Via Bloomberg