UPDATE 2-Nissan changes loss guidance to profit, China helps

* Q2 op profit 83.3 bln yen vs consensus 31.8 bln yen * Sees FY operating profit of Y120 bln instead of Y100 bln loss * Better-than-anticipated China sales help * Shares end up 1.7 pct before results (Adds quote from asset manager, details)

By Chang-Ran Kim, Asia autos correspondent

YOKOHAMA, Japan Nov 4 (Reuters) - Nissan Motor Co (7201.T), 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 the Sylphy. [ID:nT180442]

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 said it now expects to sell 3.3 million vehicles globally in the year to March, raising its forecast by 7 percent.

"It's a strong showing, demonstrating both Nissan's ability to manage through the economic crisis as well as the returns from its investments in emerging markets, particularly China," said Marc Desmidt, chief operating officer of Asian equities at BlackRock.

"Having said that, an important factor to watch out for is the sustainability of consumer demand as government stimulus around the world begins to come to an end."

Nissan, owned 44 percent by Renault SA (RENA.PA), now expects an operating profit of 120 billion yen ($1.3 billion) in the year to March, 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 Corp (7203.T) and Honda Motor Co (7267.T), 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 I/B/E/S.

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

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. For graphics on Nissan's earnings please click:

here

COST CUTTING

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.

Nissan changed its foreign exchange assumptions for the year to March 2010. It now expects the dollar to average 90 yen and the euro to average 131.6 yen, against its projections in May for 95 yen and 125 yen.

"We continue to operate in an environment that is volatile and uncertain," Ghosn said in a statement. "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 the lead in the zero-emissions field.

Next year, Nissan is looking to boost its global presence with a high-volume entry-level car that will first be produced in Thailand from March 2010.

Nissan Chief Operating Officer Toshiyuki Shiga said the so-called "global compact car" will be rolled out in three versions -- a hatchback, sedan and compact multi-purpose vehicle -- with planned production in India and China by mid-2010. Nissan aims to sell 1 million units of the model annually.

Shares of Nissan gained 3.6 percent during the second quarter, outperforming Tokyo's transport sector subindex .ITEQP.T, 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. (Additional reporting by David Dolan; Editing by Lincoln Feast and Chris Gallagher)