Nissan returns to profit

Nissan: So far so good, but more cuts to come?

Japanese car giant Nissan has reported annual net profit of 331bn yen ($2.7bn; £1.9bn), confirming a dramatic improvement in its fortunes.

Last year, Japan's number three car maker had posted net losses of 684bn yen - the seventh year in eight it had failed to make a profit.

The turnaround has been achieved through a programme of deep cost cuts involving reductions in staff and production capacity and sale of non-core businesses.

It has been overseen by Carlos Ghosn, the Brazilian-born Frenchman who took over as Nissan president in 1999 after French car maker Renault bought a 37% stake.

On Thursday, Mr Ghosn said he expected Nissan's European operations - hit hard by pound-euro and euro-yen exchange rates - to break even or achieve a modest profit in the current business year.

Expansion coming

Mr Ghosn, nicknamed "Le Cost Killer", has pursued a three-year plan to return Nissan to financial health.

The plan entailed closing five plants and cutting 21,000 jobs or about 14% of the company's global workforce.

The retrenchment is intended to prepare the company for a three-year expansion programme from 2003 to 2005, during which Nissan is to launch 22 all-new models.

Mr Ghosn said Nissan aimed to sell one million more vehicles in the business year to March 2006 than it had done in the year just ended.

In the year ended 31 March, sales stood at 6.09 trillion yen, up from 5.98 trillion yen last time.

Operating profit was 290bn yen, well ahead of the previous year's 83bn yen.

Analyst caution

Analysts were impressed by the results, which beat most forecasts.

However, they cautioned against too much optimism, saying Nissan would need to make further cost cuts and was exposed to a weakening market in the United States, which traditionally contributes more than half of profits.

Investors have, so far, shown their approval of Mr Ghosn.

Nissan shares closed at 845 yen on Thursday, more than 28% up since the start of the year.

They have easily outperformed Tokyo's benchmark Nikkei 225 index, which is flat on the year.

Renault concern

News of Nissan's turnaround came on the same day that Renault, the French company that controls it, warned of tough times in its business.

It said its target of achieving an operating profit representing 4% of sales in 2001 looked "extremely tight" because of a weak European car market, a decline in Renault sales and downturns in Turkish and Argentinian markets.

It predicted an improvement in the second half of the year and said Nissan would contribute 273m euros ($242m; £169m) to first-half profits.