Nissan shares dive more than 10% on outlook cut

Tokyo (AFP) - Nissan shares plunged Tuesday as investors reacted to the auto giant slashing its full-year profit forecast, with analysts pointing to possible divisions within the firm's top management.

Citing a sluggish European market and expensive product recalls, Japan's number-two automaker on Friday cut its full-year profit expectations and announced a sweeping management overhaul to "rejuvenate" its executive ranks.

The warning came after markets had closed Friday, with Tokyo shuttered Monday for a national holiday.

The Tokyo-listed stock lost 10.40 percent to 861 yen on Tuesday as investors gave their first reaction to last week's announcement.

"After a year of continual disappointment we needed to see signs of progress," Deutsche Bank analyst Kurt Sanger said in a note, as he cut his rating on the automakers' shares.

"The company's revised forecasts offer no such confidence."

The warnings "reflect deterioration in Nissan's competitive position", added Credit Suisse analyst Issei Takahashi, who also downgraded Nissan's shares.

Nissan said it now expects to earn 355 billion yen ($3.62 billion) in the fiscal year to March, down from an earlier 420 billion yen net profit forecast.

Despite the slimmed-down outlook, Nissan said its half-year net profit rose 6.5 percent from a year ago as sales jumped 14.7 percent, largely helped by a weaker yen.

Among the pressures on Nissan's bottom line, the company cited higher-than-expected costs tied to vehicle recalls.

The management shake-up at Nissan, maker of the Altima sedan and luxury Infiniti brand, included replacing its number-two position with a trio of executives.

Chief executive Carlos Ghosn, widely credited with rescuing a near-bankrupt Nissan when he took over more than a decade ago, said the firm needed "to rejuvenate itself".

Divisions inside the company

The rejig comes about two months after Ghosn announced a broad management restructuring at Renault. He is also chief executive of the French carmaker, which owns more than 40 percent of Nissan.

Tatsuya Mizuno, head of Tokyo-based Mizuno Credit Advisory, called Nissan's results "disappointing" and warned over a split inside the company on issues including its emerging markets strategy and relationship with Renault.

The Japanese automaker now contributes substantially to Renault's earnings.

"I see internal problems within Nissan and Renault," Mizuno said

"Both announcements over the management changes show internal conflict."

Mizuno said support for Ghosn may be weakening inside Nissan and cautioned over the French-Lebanese executive's apparent absence of a succession plan, a subject of long-time speculation.

Ghosn brushed off questions about his own retirement Friday, saying it was up to shareholders and Nissan's board.

"I can assure you there will be a time when I'll be replaced, but it's more a decision which will be up to the owners of the company," he said.

Ghosn has led an aggressive new product rollout plan, including resurrecting its budget Datsun brand to woo a new generation of cost-conscious buyers in emerging markets.

However, Nissan has trailed domestic rivals Toyota and Honda while its bid to tap emerging markets has yet to be declared a success, Mizuno said.

On Friday, Nissan said it sold 2.43 million cars globally over the half-year period, down 1.5 percent on-year, as sales in China, the world's biggest vehicle market, fell 8.3 percent.

China is an important market for Japanese automakers, particularly Nissan, which counts on the country for about one-quarter of its sales, far higher than its domestic rivals.

The company has struggled to recover from a consumer boycott of Japanese-brand goods in China last year as a long-running diplomatic dispute over a chain of East China Sea islands flared.

The automaker has benefited from a sharply weaker yen over the past year, although less so than domestic rivals Toyota and Honda.

The currency's decline makes the sector more competitive overseas and inflates the value of repatriated foreign income.

But a looming sales tax hike in Japan and concerns about Chinese demand could weigh on results, Nissan warned.