"Due to our product cycle, we have fully anticipated and alerted the market that the first half of 2006 would be a low point. But facts are harder than forecasts. So do not be too disturbed when you see that our sales and operating profit are down during the first half of this fiscal year."
"From October 2006, we have a very strong product pipeline. We will launch eight all-new products – three of them in the U.S., including our volume and profit leaders, the Nissan Altima and Infiniti G35. This product momentum will continue through NISSAN Value-Up in 2007 and beyond. Stock markets always reward performance over time."
Nissan ADRs reached a historical intra-day high of $27.71 on May 10th and a closing high of $27.50 on May 9th. Yesterday Nissan closed at $21.05, off 23.5% from its May 9th high.
Overnight in Tokyo, Nissan ordinary shares (Tokyo: 7201) lost 0.41% to close at 1,211 yen ($10.42) which is the equivalent of $20.84 for its ADRs. Since May 9th Nissan's ordinary shares are down 20%.
It's hard to say how much of Nissan's expected weak first half has been priced into its stock because of the recent correction in the Nikkei 225 and heavy selling in the U.S. The sluggish domestic auto market in Japan and a possible economic slowdown in the U.S. as borrowing costs increase mean Nissan certainly has its work cut out for it.
With the current yen-dollar exchange rate above Y116/US$1 at least Nissan should report a positive forex impact for the current quarter. Should the yen strengthen over the remainder of the year then this will negatively impact its U.S. profits but will help U.S. investors in its ADRs.
I will be keeping an eye on Nissan's ADRs to see if and how much further they are sold. Ghosn made a strong case for Nissan and has asked shareholders to believe in him and management.
Ghosn presented the following financial forecast as was also submitted to the Tokyo Stock Exchange.
• Net revenue is forecast at 10 trillion 75 billion yen, up 6.9%.
• Operating profit is expected to be 880 billion yen, up 0.9% from fiscal 2005.
• Ordinary profit is expected to reach 870 billion yen.
• Net income is forecast at 523 billion yen.
• Capital expenditures are expected to reach 550 billion yen – 5.5% of net sales.
• R&D expenses are forecast to reach 490 billion yen – 4.9% of net sales.
• ROIC is expected to be at 20%.
Click here for a link to Ghosn's speech to Nissan shareholders.