Nissan Motor Co.’s credit rating was slashed to junk by S&P Global Ratings, a blow for an automaker that has struggled to boost profitability in the years following former Chairman Carlos Ghosn’s arrest and the industry’s pivot toward electrification.

The automaker’s credit rating was cut by a notch to BB+ by S&P, which said a strong recovery in profit and sales was “unlikely.”

While Nissan recovered from two years of losses and still targets operating profit of 360 billion yen ($2.7 billion) for the fiscal year ending this month, it’s had a dearth of new car models to appeal to buyers.

While weaker yen in late 2022 also helped boost income brought home, which made up for production snags, that advantage is fading as the currency strengthens.

Nissan’s profitability will continue to lag behind its competitors for the next one to two years, S&P said.

The agency said it expects supply-chain issues to persist, delaying any recovery in sales across the U.S. and Europe, and pressure companies to lower prices.

A junk rating means Nissan will have to pay higher costs to sell foreign currency bonds abroad.

While the Yokohama-based company sold a yen-denominated sustainability bond in January, it last sold dollar and euro bonds in 2020. The price of its dollar-denominated note maturing in 2027 dropped 0.2 cents to 91.1 cents on the dollar on Tuesday. It has fallen about 3 yen since the beginning of February.

Japanese bond issuers with junk ratings include SoftBank Group and Rakuten Group, which have BB+ and BB from S&P, respectively.

The outlook for the Japanese automaker is stable, S&P said, citing that profitability is gradually improving and that the company is being conservative in its financial planning. 

The agency projected Nissan will sell 3.6 million to 3.7 million cars in the fiscal year ending March 2024, falling short of the 5.4 million targeted by the company in its long-term business strategy.

S&P also said it will consider raising its rating if, over the next 12 to 18 months, Nissan can significantly improve sales and increase cash flow.

But its rating could be lowered, the agency said, if free operating cash flow becomes negative long-term, or the company’s financial base is impacted by large strategic investments, or its market position falls further in North America or China.

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