S&P Global Ratings says the outlook for Nissan is stable, but with no strong recovery in sales or profitability in sight it has given its credit rating a ‘junk’ grade.
As reported by Bloomberg, the credit rater has stripped Nissan of its BBB- rating and downgraded the carmaker to a BB+ grade which is categorised as a non-investment or ‘junk’ grade.
Nissan received its previous rating back in September 2022.
S&P Global Ratings assign a credit rating and a ‘forward-looking opinion’ of companies based on their credit worthiness. A junk rating means Nissan will have to pay higher costs to sell foreign currency bonds abroad.
The latest credit rating comes despite Nissan recovering from the last two years of losses.
The carmaker is targeting a $360 billion yen (A$3.98 billion) profit for the fiscal year ending this month.
Recovery efforts were helped along by a weak yen last year which boosted income however as the currency strengthens, this is not good news for the carmaker.
There’s also the continued spectre of supply chain issues, which could delay any recovery in sales across the US and European markets.
In slightly better news however, it has a variety of fresh new product across key segments. In Australia, long-awaited replacements for the aged Qashqai, X-Trail and Pathfinder arrived late last year.
According to Nissan’s long-term business strategy, the target for this fiscal year was to sell 5.4 million cars however S&P report this number will likely sit between 3.6 and 3.7 million cars globally.
S&P expects Nissan’s profitability to continue to lag behind its competitors for the next 12-24 months. Should the brand see significantly improved sales or cash flow, S&P may consider raising this rating during this time.
If however Nissan does not, its rating could drop further if operating cash flow becomes negative long term or if its market position falls further in the US and China.
As for its Alliance partners, Renault received a BBB+ grade from S&P last month and Mitsubishi has had a BB+ grade since last August.
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