FRANCE: Renault swings to heavy loss
As widely anticipated, Renault has announced first half financial results that show a sharply deteriorating performance and a worse-than-expected EUR2.7bn net loss on plunging sales.
Renault Group recorded a net loss of EUR2,712m for the first half of 2009, compared with net income of EUR1,581m in the first half of 2008.
With markets worldwide in free fall, including in emerging countries, Renault Group revenues stood at EUR15,991m in first-half 2009, down 23.7% (21.5% excluding currency effects) on the same period in 2008.
"We anticipated the crisis from July 2008 and made the first decisions necessary to weather it. Today, Renault is showing resilience, as illustrated by our significantly positive free cash flow.
"We are already preparing Renault for the post-crisis period with the mass marketing of zero-emission vehicles from 2011, the expansion of the entry-level range, consolidation of our presence in emerging markets and a drive to accelerate and expand synergies with Nissan," said Carlos Ghosn, Chairman and CEO of Renault.
The group said that despite the effects of scrapping incentive schemes in major European markets, Europe contributed to half the total revenue decline.
"The product mix has been been pulled downwards," Renault said. Small cars mean thin margins.
Renault has been forced to abandon earlier profitability targets for 2009 due to the severity of its sales slump. It has focussed instead on cost-cutting and reducing bloated stocks.
Renault posted a group operating loss of EUR946m for the first half - a result that was significantly worse than analysts' expectations.
Renault said the action plan put in place by Renault in July 2008 to weather the crisis is 'bringing results'. It pointed to an improvement in free cash flow which it said gathered pace in the second quarter. The autos unit generated positive free cash flow of EUR848m in the first half of 2009, which it said was attributable to cost-cutting, lower investment and a lower working capital requirement - particularly in terms of inventory.
Vehicle inventory was cut by EUR891m compared with end-2008.
Renault's share in associated companies generated an H1 loss of EUR1,584m, of which EUR1,217m for Nissan, EUR196m for AB Volvo and EUR182m for AvtoVAZ. The negative contribution of Nissan fell considerably in the second quarter to EUR60m, compared with EUR1,151m in the first quarter.
Renault also revised its 2009 world automotive market forecast upward to more than 57m units, or a decrease of 12% on 2008 compared with a previously forecast 15% drop.
After a 13.7% decline in the first half, the European market is expected to improve in the second half-year to finish at -8% for the full year.
Renault said it will fully benefit in second-half 2009 from the launches in the first half of the year, notably the New Mégane, the two versions of New Scenic and Clio III phase 2.
The product offensive will continue with the renewal of the SM3 and SM5 in South Korea, it said.
Renault reiterated its 2009 objectives announced at the start of the year - a positive free cash flow and an increase in market share.