TOKYO: Nissan said Thursday its full-year net profit slightly topped estimates and offered an upbeat forecast for the current fiscal year, despite warning of “challenging” conditions ahead.

The Japanese automaker said it logged a net profit of 221 billion yen ($1.6 billion) for the year to March 2023, just beating its prediction of 220 billion yen, and projected 315 billion yen ($2.3 billion) for the coming year.

The company said the gains were the result of sales improvements and cost-cutting, as well as favourable foreign exchange rate fluctuations.

These helped offset the effects of an increase in raw material prices and inflation.

“The prolonged shortage of semiconductors and tight supply of parts due to the shutdown in China had a sizeable impact on production plans and vehicle supply,” the company said.

But while crises such as the global semiconductor crunch are yet to be fully resolved, there is reason to be cautiously optimistic about Nissan’s business in China for the year ahead, said president and CEO Makoto Uchida.

“China’s end to zero-Covid policy resulted in normalising its economic activity,” he said, adding that the situation there “is improving”.

Nissan is on course to recover from the havoc wrought by pandemic lockdowns, the war in Ukraine and the arrest of former boss Carlos Ghosn, which all helped plunge its full-year results into the red in 2020 and 2021.

The company said last month its global sales for the year to March 2023 stood at 3.16 million units, up 5.4 percent from a year earlier.

But despite the increase, the sales were still lower than its earlier estimate of 3.4 million units, an indication that virus lockdowns in China and semiconductor shortages hit Nissan hard, analysts said.

In March, ratings agency S&P downgraded Nissan’s credit rating to junk status on the assumption of another tough year ahead.