According to Nikkei News, Nissan, which is struggling with a performance crisis, may report its first fiscal-year net loss in nearly five years. QUICK Consensus market forecasts predict that for fiscal year 2024 (April 2024 to March 2025), Nissan's net loss could reach 225.9 billion yen (approximately $1.5 billion). This would be the company's worst performance since fiscal year 2020, when it suffered a net loss of 448.7 billion yen due to the impact of the COVID-19 pandemic. Meanwhile, QUICK's data shows that Nissan's operating profit for fiscal 2024 is expected to be 140.3 billion yen, a 75% decline compared to fiscal 2023.
Shinya Naruse, a senior analyst at Okasan Securities, estimates that Nissan's net loss for fiscal 2024 could be as high as 450 billion yen. This is mainly due to the company's cost-cutting measures, including a global workforce reduction of 9,000 jobs and a 20% production capacity cut, which are expected to result in approximately 600 billion yen in special losses. This figure is comparable to fiscal 2019, when Nissan implemented large-scale cost-saving measures, including laying off 12,500 employees and reducing production capacity by 10%, leading to a special loss of 669.4 billion yen and a net loss of 671.2 billion yen.
Analysts surveyed by QUICK expect Nissan to return to profitability in fiscal 2025, although net profit is projected to be only 30% of what was reported in fiscal 2023. However, they warn that if the restructuring process is delayed, the deterioration of Nissan's financial performance could continue into fiscal 2025. Shinya Naruse added, "If Nissan proceeds with a merger with Honda, it may turn profitable in fiscal 2025. However, if it undergoes independent restructuring, the challenge of returning to profitability will be much greater."
In December 2024, Nissan and Honda announced a merger plan in an attempt to leverage economies of scale to cope with the high costs of electrification, temporarily boosting market confidence. However, reports indicate that negotiations have been suspended due to growing disagreements. Satoru Aoyama, a senior director at Fitch Ratings Japan, described this as "increasing uncertainty over Nissan's future development" and noted that restructuring costs make it unlikely for Nissan to report a net profit in fiscal 2024. Moody's and Fitch already downgraded Nissan's outlook from "stable" to "negative" in November 2024, citing the company's worsening profitability.
In November 2024, Nissan withdrew its previous forecast of a 300 billion yen net profit for fiscal 2024, replacing it with an "undetermined" statement. The company also cut its operating profit forecast for the fiscal year by 70%, reducing it to 150 billion yen.
Nissan is now facing a challenging financing environment. Data from Nissan shows that its free cash flow, which represents the remaining cash after covering operating expenses and capital expenditures, has declined. Due to lower production impacting profits and working capital, Nissan's automotive business recorded a negative free cash flow of 448.3 billion yen for the first half of fiscal 2024 (April to September 2024), compared to a positive 193.9 billion yen in the same period of fiscal 2023. Notably, 90% of the company's revenue comes from vehicle sales, while the remaining 10% comes from vehicle financing activities.
Additionally, former U.S. President Donald Trump is planning to impose a 25% tariff on products imported from Mexico, further dimming Nissan's outlook. One-third of the company's vehicles sold in the U.S. are imported from its factories in Mexico. If the tariff plan is implemented, Nissan is expected to be the hardest-hit Japanese automaker.
Koji Endo, a senior analyst at SBI Securities, stated, "Nissan could continue operating its Mexican plants by increasing exports to markets outside the U.S., but the company is unlikely to supplement U.S. demand by shifting production to its American plants, as the models produced in the U.S. differ significantly from those made in Mexico. If the tariffs remain in place for an extended period, Nissan will have to reconsider its production capacity. Passing all additional costs onto consumers is not feasible, so Nissan will need to make internal adjustments."
