Renault warns sales to fall in 2019 as automakers struggle

PARIS (Reuters) - France's Renault RENA.PA on Thursday cut its revenue guidance for 2019 further and lowered its profitability forecast, citing difficulties in markets such as Turkey and Argentina as carmakers grapple with a broad-based slump in auto sales.

FILE PHOTO: The logo of French car manufacturer Renault is seen at a dealership of the company in Bordeaux, France, June 12, 2019./File Photo

Renault, which has just rejigged its top management as it tries to draw a line under a scandal surrounding former boss Carlos Ghosn, said sales were likely to drop between 3% and 4% this year.

In July it had already abandoned a promise to increase revenue before currency effects in 2019, saying it expected sales to be close to the previous year’s, just as rivals across the industry issued a number of profit warnings linked to falling demand in key markets like China.

In a flavor of the turbulent reporting season to come for the sector in the third quarter, Renault also said its operating margin was set to come in at 5%, versus a previous 6% goal.

It added that it was re-assessing its mid-term goals, and reported a 1.6% drop in sales for the July to September period to 11.3 billion euros ($12.6 billion), down 1.4% at constant exchange rates and without the effect of acquisitions or sales.

Interim chief executive Clotilde Delbos - whose remit as financial chief was expanded last week after Thierry Bollore was ousted as CEO - said the revised guidance was also due to Renault’s struggle to shrink research and development costs as much as it had planned to at the start of the second half.

“Everything is linked to the market and some disappointment on the action plan launched at the end of July,” Delbos told a conference call.

Carmakers are straining to meet European emissions requirements and to invest in costly new technologies to producer cleaner car models.

Partly to meet these challenges and cut costs, Renault is hoping to reboot its alliance with Japan's Nissan 7201.T after a recent management shake-up at both firms.

“The latest announcements about changes in the alliance are a very good sign that we will be able to strengthen synergies,” Delbos said.

The partnership was rocked after former alliance supremo Ghosn was arrested in Tokyo last year on financial misconduct charges, which he denies.

With Bollore, a former Ghosn protegee, now gone, Renault is banking on reviving some stalled joint industrial projects as a first step, sources close to the matter said.

Renault is also banking on model launches like a new Clio mini to give it leeway on prices and pass on the increased costs derived from regulatory pressures.

Renault said on Thursday that its operating free cash flow might not end the year as a whole in positive territory, although it would be in the black in the second half of the year.

It came in at a negative 716 million euros in the first six months of 2019.

The company, which pre-released its third-quarter trading update, said a fuller publication was still planned for Oct. 25.

Reporting by Sarah White; Editing by Geert De Clercq, Edmund Blair and Alexandra Hudson