Nissan reaches ‘rock bottom’ on dividend cut, decade-low profit

Bloomberg

Nissan Motor Co predicted annual operating profit below even the most pessimistic analyst’s estimate and cut its dividend for the first time in a decade, giving partner Renault SA a potential opening to push for greater control over their automaking alliance.
Hurt by slumping US sales, aging vehicle models and an out-of-sync product cycle, the Japanese automaker issued an outlook for profit of 230 billion yen ($2.1 billion) for the fiscal year ending in March 2020, roughly half of the average projection for 453 billion yen.
Nissan also reported its lowest annual profit in a decade at 318 billion yen.
The results put additional pressure on Chief Executive Officer Hiroto Saikawa to deliver a turnaround following the dramatic arrest of Carlos Ghosn, the former chairman and architect of the alliance between Nissan, Renault and Mitsubishi Motors Corp. To do so, Saikawa is cutting 4,800 jobs, revamping car models and focusing more on retail sales in the US.
“This feels like a return back to the pre-Ghosn era,” said Koji Endo, an analyst at SBI Securities. “They may close a factory and adjust production. In order to do this, they will need money, and this is probably why the dividend was cut.”
Nissan said it plans to pay out 40 yen a share, down from 57 yen, the first reduction since dividends were suspended in 2009. “The cut was a huge shock,” Endo said. “Nissan was popular among investors because it has been increasing dividends regardless of its performance. If that’s gone, it could drop to an all-time low.”
The dividend cut also will impact Renault, which owns 43 percent of Nissan. The French automaker’s shares fell by as much as 3.7 percent in early trading in Paris as investors digested the lower payout outlook. Nissan fell 3 percent to 840 yen at the close in Tokyo before the results, following a report in the Nikkei newspaper on the lower profit forecast.
The surprise jailing of Ghosn, who led Nissan and Renault for two decades, exposed rifts over control and decision-making. Since then, Ghosn was released, detained again and currently is back out on bail. Ghosn has denied all charges against him, saying his arrest was due to a “dirty game” played by some Nissan executives. He is now preparing for a trial that may start later this year or next.
Nissan cut its mid-term revenue targets for fiscal 2022 to about 14.5 trillion yen from 16.5 trillion yen and cut its operating margin target to 6 percent from 8 percent. While the automaker has blamed its performance on poor strategic decisions by Ghosn, Saikawa is facing internal strife over whether he’s the right executive to lead Nissan. The CEO has pushed back against renewed efforts by Renault to deepen their partnership by adopting a holding company structure.
Saikawa said Renault Chairman Jean-Dominique Senard agreed that this isn’t the right time to review the capital structure. The Japanese automaker said it will cut staff and spend 47 billion yen during the next three years to refresh all core models, add 20-plus new models and focus on US retail sales.