Renault unveils 'realistic' goal after riding out crisis
PARIS (Reuters) - French carmaker Renault (RENA.PA) said on Thursday it would lift revenue by a quarter and its operating profit margin to 5 percent in 2017, extending its turnaround plan by a year after a missed sales goal.
Renault shares rose after the operating margin increased to 3 percent last year from 1.9 percent in 2012, overshadowing more than 500 million euros ($679 million) in second-half writedowns and restructuring costs that weighed on the bottom line.
The company vowed to deliver positive cash flow in 2014 and increase both operating profit and revenue - little changed last year at 40.93 billion euros.
"This is as much as we could have asked for so early in the year," Credit Suisse analyst Mike Dean said.
The outlook is "way ahead of what PSA (Peugeot Citroen), GM or Ford will achieve in Europe this year", he added in a note.
Renault shares were 4.3 percent higher at 68.70 euros as of 0816 GMT, valuing the company at 19.55 billion euros.
The French carmaker has been cushioned from Europe's auto slump by its 43.4 percent stake in Nissan (7201.T) and a foray into low-cost cars like the Logan sedan and Duster offroader, which have sold well during the region's economic crisis.
The Romanian- and Moroccan-built budget models have surged to 41 percent of Renault's global registrations from below 30 percent in just two years.
Renault and Nissan are also rolling out new shared vehicle architectures to harness their combined global scale, drive down costs and help meet mid-term profit goals.
Chief Executive Carlos Ghosn unveiled what he described as "ambitious yet realistic" targets for 2017, including the margin objective and 50 billion euros in revenue.
"Our strategy laid out in the first part of our plan 'Drive the Change' has delivered results," he said.
But those results fell short of the 3 million vehicle sales originally pledged for last year, when deliveries reached 2.63 million. Under Ghosn, Renault had also pledged and missed 3.3 million vehicle sales and a 6 percent margin for 2009.
Postponing the completion date for its current plan by a year to 2017, Renault gave no new volume targets on Thursday, pledging instead to maintain positive cash flow every year.
"We would have liked to see a somewhat more challenging target, but Renault has decided to play it safe," said Erich Hauser, a London-based analyst with International Strategy and Investment.
Renault said net income fell by two-thirds to 586 million euros, far short of the 1.3 billion euros expected by analysts, according to Thomson Reuters SmartEstimates data.
The company announced a second-half writedown of 261 million euros on underperforming vehicle programs in addition to 227 million euros announced in July, declining to identify the products for reasons of commercial confidentiality.
"If you say a particular program has suffered an impairment, it's not a great advert for the vehicles," a Renault source explained.
Restructuring charges also rose to 250 million euros in the second half from 173 million in the first as Renault seeks voluntary departures and buyouts from its French workforce under a deal struck with labour unions last March.
Operating profit rose 58 percent to 1.242 billion euros last year as automotive free cash flow rose more than a third to 827 million. Renault said it planned to maintain its dividend at 1.72 euros.
Almost 15 years into their alliance, Renault and Nissan are lagging behind Volkswagen (VOWG_p.DE), Hyundai-Kia (005380.KS) and Toyota (7203.T) on platform scale - the number of vehicles assembled from a common architecture.
But the alliance raised its joint savings goal last month, vowing to deepen cooperation in vehicle development and production as the race for scale intensifies.
Cooperation will cut costs by at least 4.3 billion euros in 2016, the companies said - an improvement on the 4 billion euro target announced in 2012, when savings amounted to 2.7 billion. Ghosn also appointed executives to converge production, research and development and human resources. ($1 = 0.7359 euros)
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