FRANCE: Renault posts 59% jump to operating profit in 2013
Renault has posted operating profit of EUR1,242m in 2013, a 59% jump on the previous year.
However, some analysts noted that the figure fell slightly shy of expectations as the company was hit by slower sales in Europe and in its home market last year.
Nevertheless, Renault Group revenue for the year was EUR40,932m, 0.5% ahead of 2012.
The company said it will increase sales and operating profit in 2014.
The company said it benefited from a rise in registrations and that its performance was "despite a highly negative foreign currency impact". It also said it was able to post a positive price effect, reflecting its pricing policy aimed at improving the value of the Renault brand and offsetting the weakness of certain foreign currencies.
Renault CEO Carlos Ghosn said in a statement: "The commitment of all Renault employees enabled the group to meet its 2013 objectives in an unfavourable environment. Strengthened by this result, the group can begin the second part of its strategic plan with confidence".
Renault said it expects the European markets to stabilise and cautioned that growth in emerging markets, still driven by China, is "more uncertain in the short term".
The company said that the renewal of the Renault model line-up is "off to a strong start" and noted that New Clio is number 1 in France and number 3 in Europe, while claiming that Captur is the leading-selling crossover in France and segment leader in Europe.
Renault also said that it is increasing its market share outside Europe. The mix of non-European sales increased from 38% in 2010 to 50% in 2013, it said. Brazil and Russia became respectively the second and third largest markets for the company. Led by Duster, the company's most-sold vehicle in 2013, the "unique M0 range has been the driving force behind the strong growth in emerging markets".
2014-2016 action plans
Renault also offered some detail on its 2014-2016 strategic plans to include:
- A "sustained renewal and expansion of the product line-up". It said there would be an acceleration of the renewal and expansion starting in the autumn of 2014 with the launch of a new Twingo and Trafic van. These will be "followed by the successors of Espace, Megane, Scenic and a new D sedan which will all share the new alliance 3 million CMF C-D platform". It also said that the group is going to extend its market coverage with a "complete line-up of cross-over vehicles, an A-entry vehicle designed for India and South America as well as new pick-up trucks for emerging markets".
- International expansion and renewed growth in Europe. The group is aiming at capturing more than 8% market share in Brazil and Russia and 5% in India. China will become a "top priority in the coming years" with the construction of a new plant in Wuhan with an initial capacity of 150,000 units, designed to produce C- and D-segment crossovers. In Europe, Renault is aiming at recapturing second place among the mass-market brands with a "renewed line-up of connected, user-friendly and environmentally responsible vehicles". At the same time, the company noted, the high-flying Dacia brand will "sustain its undisputed leadership" in its part of the market.
- Improved competitiveness. The Renault group said it will enjoy the benefits of scale and improved competitiveness as a result of sharing alliance platforms and modules (CMF) on which more than 80% of future vehicles will be based. The company plans that standardised modules will account for two thirds of the value of future vehicles, up from one third today. It also said that the localisation of parts and components will increase in order to make better use of the company's global manufacturing footprint and contain costs. And the company added that it will also benefit from the effects of the competitiveness plans signed in France and Spain as well as manufacturing vehicles for partners. By completion of the plan, Renault said the group will reach a capacity utilisation rate of 100% in Europe (based on 2 shifts/day standard definition).
- Renault-Nissan Alliance synergy benefits to grow. Renault said that an increase in synergies from the Alliance will contribute to improving Renault's profitability. The convergence projects recently announced in purchasing, engineering, manufacturing and supply chain, and human resources will generate a minimum of EUR4.3bn the end of 2016, the company said.
- Cost containment. The strategy of sharing costs across the Alliance and with partners will allow Renault to sustain a high level of upstream development, while maintaining a ratio of R&D and CAPEX below 9% of group turnover, it is claimed.
By the end of the plan, the Renault group aims to deliver two critical objectives:
- Deliver EUR50bn in consolidated group turnover at the current scope of consolidation. Group turnover includes sales of vehicles and parts, associated services and business with partners.
- Deliver a sustained level of profitability by achieving an operating profit margin of at least 5% of group turnover, while achieving a positive free cash flow each year.
Renault meets its annual guidance.
- Registrations increase: +3.1%. Group revenues at €40,932 million, up 0.5% vs 2012.
- Positive Automotive operating profit: €495 million, compared to €34 million in 2012  for a Group operating profit of €1,242 million (3.0% of revenues), compared to €782 million(1.9% of revenues) in 2012 .
- Positive Automotive operational free cash flow: €827 million (including a positive contribution of €790 million from the change in the working capital requirement).
Commenting on the results, Carlos Ghosn, Chairman and Chief Executive Officer of Renault, said: “The commitment of all Renault employees enabled the Group to meet its 2013 objectives in an unfavorable environment. Strengthened by this result, the Group can begin the second part of its strategic plan with confidence”.
Group revenues in 2013 came to €40,932 million, up 0.5 %1. Automotive contributed €38,775 million to revenues, an increase of 0.4% vs 2012, from a rise in registrations and despite a highly negative foreign currency impact. At the same time, the Group posted a positive price effect, reflecting its pricing policy aimed at improving the value of the Renault brand and offsetting the weakness of certain foreign currencies.
Group operating profit stood at €1,242 million, compared to €782 million in 2012 , representing 3.0% of revenues (1.9% in 2012).
Automotive operating profit increased €461 million1 to €495 million, representing 1.3% of revenues. This improved result was achieved despite a negative foreign currency effect through pricing and cost controls.
Sales Financing contributed €747 million to Group operating profit, compared to €748 million in 2012 . The cost of risk (including country risk) remained under control, at 0.42% of average performing loans, compared to 0.38% in 2012.
Other operating income and expense items came to -€1,276 million, mainly due to a provision of €514 million to cover the Group’s entire exposure to Iran (already recorded in the first half), €488 million in provisions and impairment of assets, and €423 million in restructuring costs, primarily related to the competitiveness agreement signed in France. As a result, earnings before interest and taxes came to -€34 million, compared to €183 million in 2012 .
The contribution of associated companies, mainly Nissan, came to €1,444 million in 2013, compared to €1,475 million in 2012  (which included a contribution from AB Volvo until September 2012).
Net income came to €695 million and Group share to €586 million (€2.15 per share compared with €6.43 per share in 2012 ).
Automotive operational free cash flow in the period was positive at €827 million, including a positive €790 million change in the working capital.
At end-December 2013, total inventory (including the independent dealer network) represented 63 days of sales compared to 65 at end-December 2012.
The Automotive division’s net cash position came to €1,761million, up €229 million vs December 31, 2012 .
RCI Banque continued to diversify its refinancing through its retail savings account business, with net collected savings totaling €4.3 billion in France and Germany at end-December 2013.
A dividend of €1.72 per share, unchanged vs last year, will be submitted for approval at the next Shareholders’ Annual General Meeting.
The Group expects the European markets to stabilize. At the same time, growth in emerging markets, still driven by China, is more uncertain in the short term.
In this context Renault aims to:
- increase registrations and Group revenues (at constant exchange rates),
- improve Group operating profit and that of the Automotive division,
- achieve positive Automotive operational free cash flow.
Renault consolidated results
|% of revenues||3.0%||1.9%||1.8%|
|Other operating income and expense items||-1,276||-599||-607|
|Net financial income||-282||-321||-266|
|Capital gain from disposal of AB Volvo A shares||-||924||924|
|Contribution from associated companies||1,444||1,475||1,504|
|Current and deferred taxes||-433||-549||-549|
|Net income, Group share||586||1,749||1,772|
|Automotive operational free cash flow||827||609||597|
The consolidated financial statements of the Renault group at December 31, 2013 were approved by the Board of Directors on February 12, 2014. The Group’s statutory auditors have conducted a limited review of these financial statements and their report will be issued shortly. The earning report, with a complete analysis of the financial results in 2013, is available at www.renault.com in the Finance section.
 Restated for retrospective application of IFRS 11 “Joint Arrangements” and revised IAS 19 “Employee Advantages”.
Original source: Renault