Nissan’s net profit reportedly dipped 14% in Q1 FY2018-19 amid US aluminium and steel tariffs

On Thursday, July 26, Nissan Motor Co. echoed Detroit’s concerns over material costs hike due to higher aluminium and steel tariffs. Increased prices of the metals on the face of heavy tariffs were the biggest drag on Nissan’s profitability in the first quarter of FY2018-19 ended on June 30. More than half of the US$396 million declined year-on-year in operating profit, while the net profit shrank 14 per cent to stand at US$ 1042 million, in contrast to US$ 1214 million in the last financial year.

Ford Motor Co. and General Motors Co. also reported on Wednesday, July 25, that increased commodity prices led to a fall in their quarterly results by US$ 300 million, compared to year earlier.

Nissan’s dip in profit could also be attributed to investors’ higher price bid for the metals in anticipation of the possible US tariffs on automobile imports.

Nissan maintained its full-year outlook, expecting net profit to decline by a third. But this may change if aluminium and steel prices continue to climb. “We believe the commodity price hike may be more than initial expectations,” said Joji Tagawa, Nissan’s head of investor relations.

All these concerns are also distracting Nissan from putting its efforts on profit boost in the US. Moreover, Nissan’s business in the US is already facing challenges following its decision to trim cost on financial incentives and cut back on production to ease a glut in supply, especially for increasingly unpopular sedans.

In April, Nissan had cut the financial incentives by nearly 20 per cent on each vehicle compared to the previous month, while sales in the US had dropped by more than a third that month.

The overall revenue registered in the first quarter this year was US$ 24311 million, 3 per cent down from US$ 25211 million in the previous year.

However, the company looks forward to a hike in sales in the second half of the year, when a slate of new models will launch.