NSANY Nissan Motor Company Ltd (PK)

By Sean McLain 

TOKYO -- Nissan Motor Co. warned that a slowing U.S. car market and rising costs would weigh on earnings this fiscal year.

Japan's second-largest car company by sales said on Thursday that net profit would decline 19% to 535 billion yen ($4.7 billion) for the year ending in March.

Nissan forecast its sales to grow in every market but the U.S., where it expects to sell roughly the same number of vehicles as last year.

"In the U.S. we took a conservative view considering the market outlook and intensifying competition," said Hiroto Saikawa, who took over as chief executive from Carlos Ghosn in April. Mr. Ghosn retained his other role as Nissan's chairman.

The decline in profit is exacerbated by the sale of Nissan's stake in auto-parts maker Calsonic Kansei Corp., which added 80 billion yen to Nissan's bottom line for the fiscal year that ended in March 2017. Without that boost, profit would have been expected to decline by 8%.

Nissan joins other Japanese car makers in predicting tougher times ahead as sales growth slows in the U.S. At the same time, costs are expected to rise as car companies offer more incentives on new vehicles, hitting sticker prices.

Nissan has been more generous than many of its rivals, offering an average of $3,900 per vehicle in April, compared with $2,500 for Toyota Motor Corp., according to Jefferies LLC.

Those incentives helped Nissan to be the only mass-market car maker to grow its sales in the first four months of the year. But sales are showing signs of softening, with the company posting a slight decline in April.

In response to a shift away from sedans and toward crossovers and sport-utility vehicles in the U.S., Nissan plans to churn out more trucks and SUVs, aiming to have them represent 60% of its sales volume, up from 50% last year.

Nissan also plans to cut back on leasing to try to bolster used car prices, said José Muñoz, Nissan's North American chief.

A glut of lease vehicles are hitting the used car market, and these low-mileage cars are weighing on new-car demand and prices.

Nissan last year bought a controlling stake in Mitsubishi Motors Corp., adding it to its alliance with Renault SA to make one of the three largest automotive groups in the world, behind Toyota Motor Corp. and Volkswagen AG.

The current fiscal year marks the beginning of Nissan's new midterm plan, which it will unveil later this year. It follows the plan it called Power 88, in which Nissan aimed for an 8% operating profit margin and 8% global market share. The company fell short of both targets, despite sales volume growing by more than a third.

Nissan plans to hit its 8% market share goal in the next plan, leaning heavily on sales growth in China and Japan to do so, said Mr. Saikawa.

In both markets, Nissan plans to launch a range of electric vehicles, including a new version of the Leaf, to boost sales. The new Leaf will also come equipped with Nissan's Propilot autonomous driving suite, which has proved a hit with Japanese car buyers.

The company plans to expand sales of its Venucia brand of vehicles in China, which will include low-cost electric cars.

"We are an electric vehicle pioneer and we would like to maintain our lead," said Mr. Saikawa.

Nissan reported that net profit rose 27% to 663.5 billion yen for the year ended in March. Revenue fell 4% to 11.7 trillion yen.

Write to Sean McLain at sean.mclain@wsj.com

(END) Dow Jones Newswires

May 12, 2017 02:47 ET (06:47 GMT)

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