Nissan profits fall on rising costs, higher yen

Nissan in May warned that a strong yen was likely to affect its bottom line, and analysts said Japan’s auto industry as a whole was facing hard times. (AFP)
Updated 26 July 2018
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Nissan profits fall on rising costs, higher yen

TOKYO: Japanese automaker Nissan reported a drop in first quarter profits Thursday, under pressure from rising material costs and a higher yen.
Nissan said sales were up in China in the three months to June, but fell in North America and Europe.
The firm’s quarterly net profit in the period dropped 14.1 percent to ¥115.8 billion ($1.05 billion).
Operating profit was down 28.8 percent to ¥109.1 billion, with sales also down slightly to ¥2.7 trillion.
Unit sales fell in the US, and development costs rose during the quarter, said Joji Tagawa, corporate vice president.
“That was offset by increased sales in other regions and efforts to reduce procurement costs,” he told a press conference.
“But it was not enough to offset the rising prices of raw materials, which we have been seeing since last year, and the negative impacts of currency exchange rates. We saw falling income and falling profits as a result,” he said.
While US tariffs on steel and aluminum, and threatened tariffs on automobiles, have roiled markets and upset trade relations, Tagawa said the firm saw little impact.
It “was not zero” but was minimal, he said.
“We have long made efforts to localize production around the world. This has proven to be an effective way to avoid trade problems, forex problems and changes in local demand,” he said.
Nissan maintained its annual forecasts, with net profit forecast at ¥500 billion.
Operating profit is expected at ¥540 billion on annual sales of ¥12 trillion.
Nissan in May warned that a strong yen was likely to affect its bottom line, and analysts said Japan’s auto industry as a whole was facing hard times.
“For the past fiscal year, Japanese carmakers enjoyed US tax cuts, which boosted their bottomline profits, but they can’t expect that for the current year,” Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm, said before the results.
“Japanese carmakers need to step up their investment in new technologies, such as self-driving systems, in order to compete with their global rivals, while growing costs of raw materials are pressuring their earnings.”
Nissan has struggled to recover trust after an inspection scandal last year, and suffered a new blow when it acknowledged earlier this month that data on emissions and fuel economy had been deliberately “altered.”
But it said the alterations only involved just over 1,100 vehicles, and none of its models would be subject to recall, tempering fears of another scandal.


Dubai real estate market recovery to be seen as of 2022: S&P

Updated 20 February 2019
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Dubai real estate market recovery to be seen as of 2022: S&P

  • The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate
  • S&P was generally comfortable with the credit ratings of the emirate’s banking system

DUBAI: S&P Global, the ratings agency, painted a grim picture for the real estate sector in Dubai, with a meaningful recovery in property prices expected only after 2022.
At a presentation to journalists in the Dubai International Financial Center, S&P analyst Sapna Jagtiani said that under the firm’s “base case scenario,” the Dubai real estate market would fall by between 5 and 10 percent this year, roughly the same as the fall in 2018, which would bring property prices to the levels seen at the bottom of the last cycle in 2010, in the aftermath of the global financial crisis.
“On the real estate side we continue to have a very grim view of the market. While we expect prices to broadly stabilize in 2020, we don’t see a meaningful recovery in 2021. Relative to the previous recovery cycle, we believe it will take longer time for prices to display a meaningful recovery,” she said.
S&P’s verdict adds to several recent pessimistic assessments of the Dubai real estate market. Jagtiani said that conditions in the other big UAE property market, in Abu Dhabi, were not as negative, because “Abu Dhabi never did ramp up as much in 2014 and 2015 as Dubai.” S&P does not rate developers in the capital.
She added that a “stress scenario” could arise if government and royal family related developers — such as Emaar Properties, Meraas, Dubai Properties and Nakheel — which have attractive land banks and economies of scale, continue to launch new developments.
“In such a scenario, we think residential real estate prices could decline by 10-15 percent in 2019 and a further 5-10 percent in 2020. In this case, we expect no upside for Dubai residential real estate prices in 2021, as we expect it will take a while for the market to absorb oversupply,” she said.
S&P recently downgraded Damac, one of the biggest Dubai-based developers, to BB- rating, on weak market prospects.
However, Jagtiani said that, despite the “significant oversupply” from existing projects, several factors should held stabilize the market: Few, if any, major product launches; improved affordability and “bargain hunting” by bulk buyers; and a resurgence of Asian, especially Chinese, investor interest in the market.
Jagtiani also said that government measures such as new ownership and visa regulations and reduction in government fees could help prevent prices falling more sharply, as well as “increased economic activity related to Dubai Expo 2020, which is expected to attract about 25 million visitors to the emirate.”
The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate. “In our view, credit conditions deteriorated in Dubai in 2018, reducing the government’s ability to provide extraordinary financial support to its government related entities (GREs) if needed,” S&P said in a report. “The negative outlook on Dubai Electricity and Water
Authority (DEWA) partly reflects our concern that a real estate downturn beyond our base case could out increased pressure on government finances,” the report said.
It pointed out that about 70 percent of government revenues come from non-tax sources, including land transfer and mortgage registration fees, as well as charges for housing and municipality liabilities, as well as dividends from real estate developers it controls, like Emaar and Nakheel.
S&P was generally comfortable with the credit ratings of the emirate’s banking system, which has an estimated 20 percent exposure to real estate. “Banks in the UAE tend to generally display a good level of profitability and capitalization, giving them a good margin to absorb a moderate increase in risks,” the report said.