Renault has reported net income of EUR2.9bn and a group operating margin of EUR1,063m or 2.56%, down from 3.2% in 2005.
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Revenues of EUR41,528m were down 0.8% on 2005. The automaker said the downturn was due mainly to a lower contribution from the France and Europe regions (down 4.2% on 2005) where it “pursued its selective commercial policy pending the product offensive planned to start in second-half 2007”, but reported “a stronger contribution” from the Euromed, Americas and Asia-Africa regions which were up 2.3%.
Global sales decreased 4% overall though growth outside Europe continued, accounting for 30% of total sales compared with 27% in 2005.
The increase in production capacities announced for India, Romania and Russia, and the launch of new models designed to meet local demand on these fast-growing markets, are the main driving forces behind Renault’s growth through to 2009. The Logan MCV, the first of the plan’s 26 new models, was successfully launched late last year.
“Thanks to the total commitment of everyone at Renault to reducing costs, improving quality and boosting the international performance of the group, Renault has achieved its 2006 operating margin in line with the roll-out of Renault Commitment 2009” said president and CEO Carlos Ghosn.
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By GlobalDataGhosn said business in 2006 was affected by the lower sales volume in Europe, and the consequent lower absorption of fixed costs, a higher-than-expected rise in raw materials prices, and the cost of transition to the Euro 4 emissions standard, not passed on in selling prices.
The continued development of 26 new products, along with environmentally friendly and safety technologies, hiked research and development expenditure EUR 136m to EUR2,400m.
The group reported operating income of EUR877m, compared to EUR 1,514m in 2005. Net financial income was EUR61m, compared to an expense of EUR327m in 2005.
“Efficient management of debt, the net cost of which was EUR19m (compared to EUR57m in 2005), and the capital gains made on Scania securities in the second half-year are two main drivers of 2006 financial income,” Renault said in its results statement.
It reported net profit of EUR2,260m from its share in the income of associated companies, particularly Nissan (EUR1,871m) and Volvo (EUR384m). Net income was EUR 2,943m and earnings per share EUR11.17.
At the annual general meeting on 2 May, directors will recommend increasing the dividend to EUR 3.10 per share, from EUR 2.40 last year.
Outlook
Renault expects sales will start to grow again in 2007 and, in Europe, where markets are stable, will continue to pursue its so-called ‘selective commercial policy’ – largely of concentrating on profitable volume instead of low-margin fleet and daily rental sales.
The automaker expects sales to get a second half boost from the launches of the second generation Twingo (expected this time around with right hand drive as well) and redesigned third generation Laguna.
Outside Europe, the launch of the Logan in Brazil, Iran and India this spring 2007 will contribute to sales growth, Reanult said and, at year’s end, a cross-over will be launched in South Korea.
Overall, global sales are expected to increase only slightly in 2007 with most growth in the second half.
To be on track with the commitment of 6% operating margin in 2009, annual goals were set in July 2006. The 2007 target is 3%.
