TOKYO -- Nissan Motor Co. posted a surprise drop in quarterly profits on Friday because of higher raw material, R&D and sales costs but kept its full-year forecasts unchanged.
Many analysts had expected a rise in second-quarter profits, backed by a double-digit expansion in sales in the United States.
Rival Honda Motor Co. had a bigger-than-expected 9.2 percent rise in July-to-September operating profit and raised its full-year forecast by 7 percent. Toyota Motor Corp. is expected to report 4 percent growth in quarterly operating profit on Monday.
"Many of the external risks we forecast at the beginning of the year have materialized, including higher incentives, commodity prices and interest rates," Nissan CEO Carlos Ghosn said in a statement.
"The business climate in the second half is likely to remain severe as the risks are expected to continue ... (but) we are maintaining our full-year forecast, supported by strong business fundamentals and the release of nine all-new models in key markets around the world," he said.
Second-quarter operating profit shrank 3.5 percent to $2.04 billion, hit by higher spending on U.S. sales incentives to push aging models from dealers' lots. It lagged an average estimate of $2.17 billion from 10 brokerages.
Net profit also fell 3.5 percent, to $1.09 billion, even though sales grew 10.3 percent to $19.83 billion.
Nissan, 44 percent-owned by Renault, still expects a 4.3 percent rise in full-year operating profit to a record $8.11 billion, and hopes new models, including the Tiida Latio unveiled on Friday, will spark growth in its home market.
It kept its average dollar and euro assumption rates at 105 yen and 125 yen for the year to March 31 and maintained its global sales volume forecast for the year at 3.38 million units.
Under Ghosn, Nissan has slashed costs, largely through sharing parts procurement with Renault, while laying the groundwork for future growth by launching scores of new cars.
Armed with 28 fresh models, Nissan aims to lift its global sales to 4.2 million units by 2007-08 under a three-year plan starting in April, expanding into untapped regions and vehicle segments.
For the half-year to Sept. 30, operating profit edged up 0.6 percent to a record $3.80 billion, net profit rose 0.5 percent to $2.25 billion and sales grew 12.7 percent to $37.80 billion.
U.S. PRICE WAR
Along with others slugging it out in the United States, Nissan faces a potential spiral of price cutting as high inventories force car makers including General Motors and Ford Motor Co. to woo buyers with discounts and giveaways.
GM and Ford reported big losses in their core automotive businesses in July to September, spending $3,800 to $4,300 per car on sales incentives last month, according to Autodata.
Nissan's worldwide sales grew 8.8 percent in April to September to 1.596 million units but slid 4.9 percent in Japan as it held off on new models until last month to try to boost volume in the year to end to September 2005, during which it has promised to sell 3.6 million cars worldwide, or 1 million more than in 2001.
Nissan, which reports under Japanese accounting rules, does not provide second- and fourth-quarter results or analyses.
Analysts have said Nissan's biggest challenge could be managing a smooth transition when Ghosn takes on the added role of running Renault from April. The Brazilian-born Frenchman has played down concerns, saying he will be able to lead both.
Ghosn has said he would name a COO to oversee Nissan's day-to-day operations by year end.