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AUTOMOTIVE: Nissan (NSANY Baa3[N]/BB+/BBB-[N]): Moody’s Outlook Negative

AUTOMOTIVE
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High likelihood of a downgrade down the track with margins depressed. Much will depend on the cost savings program. Spreads are already well into double-B territory.

  • Following Fitch yesterday and as we expected, Moody’s has revised its outlook on Nissan to negative.
  • Adj. EBITA margin fell to 1% LTM (4.6% reported), with a 2-3% rating threshold. Moody’s doesn’t expect much recovery in the next 12-18 months and consensus has just 60bps of EBIT margin improvement from year end to two years forward.
  • LTM automotive FCF turned negative, with a sustained period in the red a downgrade trigger. Consensus for group FCF is negative through the next 3 FY. Moody’s sees slightly positive next year on reversal of WC buildup. Restructuring costs are likely to be elevated with Y400bn cost savings planned.
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High likelihood of a downgrade down the track with margins depressed. Much will depend on the cost savings program. Spreads are already well into double-B territory.

  • Following Fitch yesterday and as we expected, Moody’s has revised its outlook on Nissan to negative.
  • Adj. EBITA margin fell to 1% LTM (4.6% reported), with a 2-3% rating threshold. Moody’s doesn’t expect much recovery in the next 12-18 months and consensus has just 60bps of EBIT margin improvement from year end to two years forward.
  • LTM automotive FCF turned negative, with a sustained period in the red a downgrade trigger. Consensus for group FCF is negative through the next 3 FY. Moody’s sees slightly positive next year on reversal of WC buildup. Restructuring costs are likely to be elevated with Y400bn cost savings planned.