S&P Lowers Nissan Motor to BBB-/A-3; Outlook Stable
20 March 1998
S&P Lowers Nissan Motor to BBB-/A-3; Outlook StableTOKYO, March 20 -- Standard & Poor's today lowered its long-term ratings of Nissan Motor Co. Ltd., Nissan Motor Acceptance Corp., Nissan International Finance (Netherlands) B.V., Nissan Motor Corp. of USA, and Nissan Capital of America Inc. to triple-'B'-minus from triple-'B'. At the same time, the commercial paper ratings of Nissan International Finance (Netherlands) B.V. and Nissan Capital of America Inc. were lowered to 'A-3' from 'A-2'. (see ratings list below) The outlook on the ratings is stable. The rating downgrade reflects Nissan's worsened prospects for earnings recovery under difficult industry conditions. Nissan recorded a 5.8% decrease in vehicle sales in Japan in calendar 1997, pushing its vehicle market share down to 15.37%. The company has been strengthening its product line in the recreational vehicle (RV) and small car segments in recent years. However, competition in these growth segments is intensifying, and the company has not been able to offset the significant drop in overall market volume. Nissan is also falling behind in sales in the U.S. compared with peers, while sales in Asia are being affected to some extent by the financial crisis. On the other hand, earnings have improved in Europe and Mexico, where the company previously suffered large losses. Although Nissan currently benefits from a surge in export sales and the recent depreciation in the yen, these benefits are not expected to continue long-term. Nissan's profitability remains subpar, though it has recovered somewhat from net losses in fiscals 1993-1996. Nissan has revised downwards its earnings forecast for the fiscal year ending March 31, 1998; consolidated net income is expected to fall below year-earlier levels of Y77 billion. Further deterioration in profitability is less likely, as the company continues its efforts to restructure operations and strengthen its product mix. Debt leverage is high compared to major industry peers, with total debt to capital, adjusted for finance receivables, over 60%. Still, Nissan benefits from adequate financial flexibility as a result of its liquid portfolio and solid banking relationships. OUTLOOK: Stable Tough competition and challenging market conditions will make it difficult for Nissan to lift earnings and improve its financial profile significantly. However, its product development capabilities and strong market presence worldwide should enable it to maintain investment-grade credit quality, Standard & Poor's said. -- CreditWire RATINGS REVISED TO FROM Nissan Motor Co. Ltd. Corporate credit rating BBB-/Stable/A-3 BBB/Negative/A-2 Sr unsecd BBB- BBB Nissan Motor Acceptance Corp. Corporate credit rating BBB-/Stable/-- BBB/Negative/-- Nissan International Finance (Netherlands) B.V. Corporate credit rating BBB-/Stable/A-3 BBB/Negative/A-2 Euro CP prog (support: Nissan Motor Co. Ltd.) A-3 A-2 Nissan Motor Corp. of USA Corporate credit rating BBB-/Stable/A-3 BBB/Negative/A-2 Nissan Capital of America Inc. Corporate credit rating BBB-/Stable/A-3 BBB/Negative/A-3 CP (support: Nissan Motor Co. Ltd.; gtd: Nissan Motor Corp. of USA) A-3 A-2 SOURCE Standard & Poor's CreditWire