Nissan Motor Co withdrew its dividend outlook and said it’s now undecided on a payout, an unexpected blow to top shareholder Renault SA.
The Japanese automaker, which slashed its profit and sales outlook for the current fiscal year to March, had already cut its dividend earlier this year. It withdrew its outlook for a 40 yen-per-share divided for the year in a filing to the Tokyo Stock Exchange. Renault shares fell as much as 3.4% in Paris trading.
The French automaker stands to lose the most because it owns 43% of Nissan. The Yokohama-based manufacturer is conserving cash as it embarks on 12,500 job cuts globally, and cost reductions aren’t happening soon enough to blunt the impact of weaker demand, higher raw materials costs and unfavourable currency trends. Makoto Uchida, who takes over as chief executive officer next month, inherits the monumental task of restoring Nissan’s brand image and rolling out new cars that appeal to retail customers.
“Renault’s profits aren’t very good either, so less dividend means reduced cash flow and flexibility,” said Tatsuo Yoshida, a Bloomberg Intelligence analyst.
Stephen Ma, Nissan’s recently appointed chief financial officer, said in a briefing in Tokyo that the new CEO and management team will provide an update on the dividend once they are in place starting next month.
Renault last month reduced its financial guidance for 2019, citing deteriorating results in markets including Argentina, and spending on research and development. It embarked on its own search for a new CEO after ousting Thierry Bollore.
Back in May, Nissan had cut its annual dividend to 40 yen from 57 yen per share, marking its first reduction since payouts were suspended in 2009. Another similar cut or suspension could translate into billions in less income for Renault. At the time of the previous cut, Evercore analysts predicted Renault’s annual earnings would fall by about a fifth, about 2.2 billion euros ($2.5 billion) over three years.
The surprise announcement on the dividend underscores Nissan’s struggles as it seeks to get back on track almost a year after the arrest of former Chairman Carlos Ghosn. Nissan shares rose 1% before the results were announced. The stock is down 19% this year.
For the fiscal year to March, operating profit will be 150 billion yen ($1.4 billion), below the prior forecast for 230 billion yen and just short of the analysts’ average projection for 158 billion yen. The revenue outlook was cut to 10.6 trillion yen, compared with the prior forecast for 11.3 trillion yen.