Published: Wednesday, 4 Nov 2009 | 3:54 AM ET

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Nissan Motor, Japan's third-biggest automaker, revised its annual outlook to a profit from a loss on Wednesday as soaring sales in China helped drive quarterly earnings beyond the market's expectations.

Nissan had been expected to lift its forecasts after it cranked up its sales target in the fast-growing Chinese market by nearly a fifth in September as Beijing's tax incentives for smaller cars boosted demand for models such as the Tiida and Sylphy.

Most other Japanese rivals have also lifted their annual forecasts as stimulus measures by governments around the world have provided at least a temporary boost to demand.

Nissan, owned 44 percent by Renault, now expects an operating profit of 120 billion yen ($1.3 billion) in the year to March 31, 2010, instead of the 100 billion yen loss it had forecast previously.

Earnings made in China are counted in Nissan's operating profits, unlike those at Toyota Motor and Honda Motor, which report under U.S. accounting rules.

The new operating forecast exceeds an average forecast for an operating profit of 60 billion yen in a poll of 20 analysts by Thomson Reuters.

Nissan also revised its net loss forecast to 40 billion yen from a loss of 170 billion yen.

David Zalubowski / AP

For the July-September quarter, Nissan made an operating profit of 83.28 billion yen ($922 million), down 25.4 percent from a profit of 111.7 billion yen a year earlier and beating an average estimate of 31.8 billion yen from four analysts.

It made a net profit of 25.53 billion yen, down 65 percent.

Nissan executives have said efforts to shave costs and return to positive free cash flow were slightly ahead of plans, while higher-than-anticipated sales in China were helping to offset some of the sharp falls in the United States and the Middle East.

Nissan has also been shifting production of some of its cars from Japan to escape a rising yen.

Chief Executive Carlos Ghosn said last month Nissan was considering going further by transferring production of some Middle East-bound vehicles to the United States from Japan.

"We continue to operate in an environment that is volatile and uncertain," Ghosn said in a statement. "Our performance in the first half is encouraging, demonstrating that Nissan's Recovery Plan is on track. Our outlook will remain cautious until we see evidence that economic recovery can be sustained in world markets."

Further out, Nissan and partner Renault are staking much of their resources on the still-unproven electric vehicle segment with a planned global rollout in 2012, hoping to take a lead in the zero-emissions field.

Shares in Nissan gained 3.6 percent during the second quarter, outperforming Tokyo's transport sector subindex, which was flat. Nissan ended up 1.7 percent at 661 yen on Wednesday before the results were announced, against the transport sector's 0.9 percent rise.

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