Nissan Motor Co. reported a smaller-than-expected 10.4 per cent decline in quarterly operating profit on Wednesday as it recovered swiftly from a parts shortage that hammered the industry after the March 11 Japan earthquake.
Japan's second-biggest auto maker posted an operating profit the equivalent of $1.81-billion for the April-June period, more than double the average of ¥70-billion estimated by eight analysts polled by Thomson Reuters.
"This result is good enough to make me almost forget about the negative impact of the earthquake," said Naoki Fujiwara, a fund manager at Shinkin Asset Management in Tokyo.
"I see a big chance of an upward revision to their annual outlook when they announce first-half results," he said, calling the first-quarter results a positive surprise.
Nissan, 43 per cent owned by Renault SA , is poised to outshine Toyota Motor Corp and Honda Motor Co this year thanks to a faster recovery from the supply disruption and aggressive expansion in China.
Honda and Toyota, which will report earnings on Aug. 1 and Aug. 2, are both forecast to post an operating loss, although comparisons favour Nissan because it books earnings from China at the operating level under Japanese accounting rules. Toyota and Honda use U.S. standards, which require their Chinese earnings to be booked as equity on the bottom line.
"In light of the historic scale of the disasters, we think the first-quarter results are remarkable and a testament to the strength of Japanese manufacturing and its suppliers," Joji Tagawa, corporate vice president of finance, told reporters.
Nissan kept its forecasts for operating profit at ¥460-billion and net profit at ¥270-billion for the full year to March 2012, below consensus forecasts.
Nissan is planning to boost sales by 9.9 per cent to 4.6 million vehicles this year, driven by projected double-digit growth in China and Europe. Earlier this week, Nissan outlined mid-term growth plans for its Southeast Asian and Chinese operations, calling for big gains in market share.
A shortage of microcontrollers and other components hit Japanese production in April, but Nissan managed to eke out gains by the following month, leaving rivals in the dust.
Globally, Nissan's production rose 9.5 per cent last quarter and sales grew 10.6 per cent to 1.056 million vehicles.
First-quarter revenue rose 1.6 per cent to ¥2.08-trillion, but net profit sank 20 per cent to ¥85-billion as a ¥10 fall in the dollar to an average ¥81.7 during the first quarter slashed operating profits by ¥55-billion.
On Wednesday, the dollar was trading even lower, around ¥77.6, against Nissan's assumption of ¥80 for the year.
Global automakers also face growing risks of an economic slowdown as debt worries escalate in the United States and Europe, while demand for cars has slowed in China, the world's biggest auto market.
Ford Motor Co on Tuesday reported a better-than-expected net profit, but remained cautious about consumer demand, saying it expected U.S. sales for this year to be at the bottom end of its forecast of 13 million to 13.5 million vehicles.
"Monetary tightening in emerging markets and the U.S. debt problems could be a strategic risk for Nissan," said Shinkin's Mr. Fujiwara. "If we start seeing an increase in inventory levels, the company's aggressive growth strategy could backfire."
Nissan's shares are the best-performing Japanese auto stock so far this year, gaining 12 per cent, while Tokyo's transport sector subindex has risen two per cent. Before the results, Nissan's shares closed down 1.9 per cent at ¥846.
With Files from Mariko Katsumura in Tokyo