by Gilles Guillaume
PARIS (Reuters) – Renault announced on Wednesday a net profit up sharply in 2023, but slightly below expectations, as well as a series of records, the result of its strategic plan focused on cost reductions and the most profitable models which allows it to offer a more generous dividend than expected to its shareholders.
The diamond group, whose ambition is still to join the club of manufacturers with double-digit margins, such as Stellantis, at the end of the decade, posted a record operating margin of 7.9% last year, compared to 5 .5% in 2022 and 2.8% in 2021.
“(Our results) reflect the success of our Renaulution strategy,” said Managing Director Luca de Meo, quoted in a press release. “Our fundamentals have never been stronger and there is no question of stopping there.”
Net profit, group share, weighed down in 2022 by Renault’s exit from the Russian market, rose sharply to 2.2 billion euros but nevertheless lower than expectations since the LSEG consensus, based on the responses of 14 analysts, gave around 2.5 billion euros after the impact of the capital loss on the sale of Nissan shares (0.9 billion euros on operating income).
The turnover, at 52.4 billion, is also below the consensus which gave 52.9 billion, but is experiencing growth of 13.1%.
In a note, Bernstein’s Daniel Roeska points out that the margin slightly exceeds market expectations while the forecast for 2024, the strong dividend and free cash flow, “are encouraging”.
During a press conference call, financial director Thierry Piéton underlined that with the record free cash flow of 3 billion euros for 2023, the group had generated over the past three years four times more free cash flow than over the three years preceding Covid, a reflection of Renault’s “transformation”.
Building on its 2023 results, the French car manufacturer proposed paying a “significantly higher” dividend at 1.85 euros, after the return of a symbolic payment the previous year and three years without a dividend.
The LSEG consensus gave a payment of 1.44 euros. The amount proposed is the highest since 2019 – more than 3 euros.
“(This) gives an indication of the level of confidence we have in our ability to continue to increase the group’s performance,” added Thierry Piéton.
TEN NEW LAUNCHES IN 2024
Renault, which had suffered a historic loss of 8 billion euros in 2020, under the leadership of Luca de Meo, undertook a drastic restructuring and an ambitious transformation, with the creation of an entity dedicated to thermal and hybrid engines, Horse, and another devoted to electricity and software, Ampère, whose IPO project was canceled last month.
The group also returned to growth in its sales volumes in 2023, after four consecutive years of decline. If the markets look uncertain in 2024, Renault is banking on renewing its range with the electric Scenic and R5, or the Rafale hybrid coupe SUV, making a total of no less than ten new vehicle launches this year.
The separation of the thermal activity contributed to the improvement of the operating margin, which without this effect would have increased from 5.4% to 6.9%.
The financial director stressed that this increase still constituted “a very, very strong increase, whatever way of looking at the results”, as did the objective of an operating margin greater than or equal to 7.5% in 2024, compared at 6.9%.
The finalization of the JV between Renault Horse and China’s Geely, which sources told Reuters could take place towards the end of February, remains conditional on obtaining regulatory approvals.
“We are currently in a phase of waiting for regulatory approvals, particularly (…) in China, which are a little outside of our control,” indicated Thierry Piéton.
With a net financial position in the automobile industry at historic levels (3.7 billion euros), Renault is also still hoping for a return to the investment category in the eyes of credit rating agencies, for which Thierry Piéton has said it recorded “rather favorable signals”.
(Reporting by Gilles Guillaume, with Nick Carey in London, edited by Bertrand Boucey and Jean Terzian)
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