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Investing.com -- Nissan (OTC:NSANY) Motor’s (TYO:7201) credit rating has now been downgraded to junk by all three major rating agencies after a second cut within days.
Fitch Ratings lowered Nissan’s rating from BBB- to BB+, pointing to weak earnings and an uncertain recovery outlook. Moody’s downgraded the automaker last week, while S&P Global Ratings has classified Nissan as speculative grade since March 2023.
“The downgrade reflects Nissan’s persistently low profitability, with a delayed recovery trajectory against our expectations,” Fitch analysts led by Satoru Aoyama wrote in a report on Wednesday. “We expect profitability to remain pressured over the next one to two years.”
Earlier this month, Nissan executives reduced their revenue and operating income forecasts and warned of an expected ¥80 billion ($535 million) net loss for the fiscal year ending in March. The weak financial outlook adds pressure on management to secure a new recovery strategy after failed merger talks with Honda Motor Co (NYSE:HMC).
Last week, Moody’s Ratings also downgraded Nissan’s credit by one notch to junk status, citing a deteriorating outlook. The agency cut the company’s senior unsecured rating from Baa3 to Ba1 and maintained a negative outlook.
In a report, Moody’s senior analyst Dean Enjo highlighted “risks associated with the implementation of its new restructuring plan, the renewal of its aging product range and global trade policies.”
Nissan has been working through a turnaround plan that includes cutting 9,000 jobs and reducing global manufacturing capacity by 20%. However, its performance in key markets like the US and China has been weaker than expected.
Moody’s warned that Nissan’s free cash flow, already negative this fiscal year, is likely to remain in the red in the next fiscal year starting in April. The agency also flagged risks from global trade conditions, particularly potential US tariffs on Nissan’s significant production operations in Mexico.
Still, the firm noted that Nissan’s automotive division holds substantial cash reserves, which should provide enough liquidity to cover negative free cash flow and debt obligations over the next 12 months.
Last month, S&P Global Ratings affirmed Nissan’s BB+ rating but revised its credit outlook to negative.