by Gilles Guillaume

PARIS(Reuters) – Renault reported a new record operating margin in the first half on Wednesday, the result of price increases on its new models and continued cost reductions undertaken over several years.

The diamond-shaped group, which is aiming for a double-digit margin by 2030 as part of its recovery strategy after its major difficulties at the end of the previous decade, achieved an operating margin of 8.1% in the first six months of the year, compared with 7.6% a year earlier and 7.9% expected by analysts, according to a consensus provided by the company based on the responses of 22 of them.

“Our efforts to reduce costs and focus our business policy on value are reflected in our new range, the best this company has seen in 3 decades,” CEO Luca de Meo said in a statement.

During a press conference call, CFO Thierry Piéton added that the group “still has a good margin for improvement” in the second half since new vehicle launches – ten in total this year – only represented 10% of sales in the first half.

He declined to say, however, whether the ambition of joining the club of manufacturers with double-digit margins by the end of the decade, which Stellantis and premium brands such as Tesla, BMW and Mercedes have long been accustomed to, could be fulfilled earlier than expected.

“When we are in a position to change the guidance, we will change the guidance (…) but in any case we continue to be ahead of the roadmap that we had set for ourselves”

The French carmaker confirmed its annual targets, including an operating margin of 7.5% or more. It had already posted a record margin of 7.9% last year, compared to 5.5% in 2022 and 2.8% in 2021.

Turnover was almost stable (+0.4% to 26.96 billion euros) over the period, affected by significant exchange rate effects, particularly due to the fall in the Argentine peso, but also higher than the consensus which gave 26.90 billion.

Net profit, group share, fell by almost 40% to 1.293 billion euros, due in particular to a capital loss recorded on the sale of Nissan shares undertaken as part of the overhaul of the Franco-Japanese alliance.

Renault reported last week a 1.9% growth in its sales volume in the first half, mainly driven by hybrid vehicles, and not by electric vehicles, reflecting a European market much less vigorous than expected for non-thermal models.

“There is currently a lot of volatility around electric vehicles, we now have the chance to rely on two pillars,” added Thierry Piéton, referring to the Ampere (electric) and Horse-Power (thermal and hybrid) entities.

The group, one of whose priorities is also to return to investment grade for its credit rating, saw its net automotive financial position reach a historic level of 4.86 billion euros in the first half.

(Report by Gilles Guillaume, with Nick Carey in London, edited by Augustin Turpin and Kate Entringer)

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