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By Chang-Ran Kim
TOKYO, Nov 20 (Reuters) - Nissan Diesel Motor , one of Japan's weakest truckmakers, said on Wednesday it veered back into the red for the six months to September, hit by a huge one-off loss to set aside reserves against soured credits.
Weighed down by a relentless slide in domestic truck demand, Nissan Diesel also forecast a net loss for the year to March, its first full-year decline in three years.
Group net losses for April-September totalled 4.57 billion yen ($37 million), compared with a profit of 226 million yen in the year-earlier period.
Operating profit fell eight percent to 3.87 billion yen despite continued efforts to cut costs, as sales fell 1.3 percent to 184.14 billion yen.
The net and operating results were slightly worse than figures reported by the Nihon Keizai Shimbun business newspaper on Tuesday.
"The domestic market remained weak due to the sluggish economy, but exports helped offset some of the fall," senior managing director Takeo Ohkusa told a news conference.
Japanese truckmakers have been suffering from overcapacity and price competition in a market that has shrunk due to economic contraction. Most industry watchers say the current level of demand is too low to support four major truckmakers.
Nissan Diesel said industry-wide truck demand in Japan fell to a 37-year low of 35,042 units in the first half, and forecast a market of 71,000 for the year to March.
In addition to such industry-wide woes, Nissan Diesel is reeling under massive interest-bearing debt, meaning interest payments will continue to eat into income.
The truckmaker announced in September a new business plan aimed at cutting such debt by 40 percent to 250 billion yen by March 2006. But with low cash flow and operating income, analysts see little hope of any significant progress.
At the end of September, Nissan Diesel's debt totalled 405.3 billion yen, down a fraction from 416.9 billion yen in March.
CHINA TIES
To make up for sluggish domestic sales, Nissan Diesel has said it would strengthen ties with China's second-largest auto group, Dongfeng Motor Corp.
Nissan Diesel is targeting a stronger foothold in China's expanding truck market, which is expected to get a significant lift in the run-up to the 2008 Beijing Olympics.
Overseas markets are already helping keep the truckmaker afloat, with sales volume outside Japan now equalling the number of trucks sold domestically in the first half.
"Sales in Asia were good, especially in China and Malaysia," Ohkusa said. In the just-ended term, overseas sales surged 45 percent, while in Japan they plunged 12 percent.
But given the rough overall business conditions, the truckmaker lowered its full-year operating profit forecast to 10 billion yen from a May forecast of 13 billion yen. The new figure would represent a 13 percent fall from last year.
It sees net loss of four billion yen, versus a profit of 600 million yen last year.
After falling 5.3 percent a day earlier on the newspaper report, Nissan Diesel shares closed up 2.78 percent at 74 yen on Wednesday.
The Nikkei 225 share average ended up 1.13 percent.
Nissan Diesel is owned 22.5 percent each by Nissan Motor Co and Renault SA , but neither automaker consolidates the company in their books. ($1=122.21 yen)