Nissan's profit drops 43 percent on rising yen

Nissan Motor Co. said Friday its net profit for the April-June quarter dropped 42.8 percent, hit by a rising yen and accounting provisions for the declining value of leased vehicles.

Japan's third-largest automaker said net profit fell to 52.8 billion yen ($505 million) for the quarter, while sales fell 4.1 percent from a year earlier to 2.3 trillion yen ($22.4 billion).

"In the face of the severe operating environment, Nissan remains resilient but cautious on the outlook for our industry," said Chief Executive Carlos Ghosn in a statement.

"We have identified the major risks and taken actions to address them, particularly in the U.S. market," he said.

Despite a slump in demand in the U.S. and Japanese markets and soaring material costs, Nissan kept its earnings forecasts for the current fiscal year through March 2009 with a net profit of 340 billion yen ($3.3 billion). Sales are likely to stay at 10.4 trillion yen ($99 billion).

Nissan's global sales for the April-June quarter rose 6.9 percent from a year earlier to 936,000 vehicles.

But its sales in the U.S. market fell 1.5 percent to 253,000 units, Nissan said. It said the American auto market shrank by 12 percent during the quarter.

Nissan's North American sales edged up 1.9 percent to 330,000 units.

Sales in Japan fell 2.2 percent to 148,000 units, while those in Europe were flat at 156,000 units.

Nissan was hit hard by a stronger yen in the quarter compared with the same period last year. A strong yen makes Japanese goods less competitive abroad and eats into exporters' profits when repatriated.

Nissan said foreign exchange losses amounted to 54.7 billion yen ($523 million) in the quarter. Accounting provisions booked for the declining value of leased vehicles in the United States and Canada totaled 42 billion yen ($402 million).

Nissan shares fell 1.4 percent to 828 yen Friday in Tokyo. Earnings were announced after trading ended.

Nissan also said it was in talks with "a number of governments around the world" for deals on electric vehicles.

"We are in discussion with several different countries, states, cities and individual companies around the world for future EV (electric vehicles) partnerships," Nissan's corporate vice president Simon Sproule told reporters.

The Nissan-Renault auto alliance, recently formed a partnership with the Portuguese government that includes plans to sell electric vehicles in Portugal in 2011. Renault SA of France owns 44 percent of Nissan.

The move was the latest in Nissan's aggressive forging of deals with cities and governments on electric vehicles as soaring gas prices and worries about global warming make the green technology more appealing.