Renault came ‘back from hell’, says CEO after carmaker posts profit

French carmaker Renault said on Friday it expected to deliver a full-year 2021 profit.
By : Bloomberg
| Updated on: 31 Jul 2021, 14:09 PM
Renault 5 reborn as electric car.
Renault 5 reborn as electric car.
Renault 5 reborn as electric car.
Renault 5 reborn as electric car.

Renault SA’s chief declared the automaker is firmly on the comeback trail after a record loss, forecasting stable profitability despite the global chip shortage and rising raw material prices.

The carmaker has “abandoned the approach of only looking for sheer growth," Chief Executive Officer Luca de Meo said in a Bloomberg TV interview. “We are actually back from hell with this first semester."

Renault swung to net income of 368 million euros ($437 million) during the first half, from a 7.4 billion-euro loss a year ago. Renault now expects shortages in semiconductors to cost the company about 200,000 vehicles this year, double a previous estimate.

Similar Cars

Find More Cars
Renault Kwid (HT Auto photo)
Renault Kwid
799 cc | Petrol | Manual | 25 kmpl
₹4.07 - 5.51 Lakhs**Ex-showroom price
Nissan Magnite (HT Auto photo)
Nissan Magnite
18.75 kmpl | 999 cc | Manual | Petrol | 5 Person | FWD | 71 bhp | 96 Nm | 205 mm | 939 kg | 336 litres | 5 Gears | 1.0L B4D | No | 40 litres | Hrs | 750 Km | | No | Front & Rear | seconds | Kmph | 18 kmpl
₹4.99 - 10.05 Lakhs**Ex-showroom price
Renault Triber (HT Auto photo)
Renault Triber
999 cc | Petrol | Manual | 19 kmpl
₹5.12 - 7.98 Lakhs**Ex-showroom price
Renault Kiger (HT Auto photo)
Renault Kiger
999 cc | Petrol | Manual
₹5.45 - 10.09 Lakhs**Ex-showroom price
Volkswagen Polo (HT Auto photo)
Volkswagen Polo
999 cc | Petrol | Manual | 17.74 kmpl
₹5.83 - 10 Lakhs**Ex-showroom price
Renault City K-ze (HT Auto photo)
UPCOMING
Renault City K-ze
Electric | Automatic
₹6 - 10 Lakhs* *Expected Price

Giving financial guidance for the first time in 2021, the company expects full-year operating margin to be roughly in line with the 2.8% achieved in the first half. That’s just short of its 3% target for 2023, although well below competitors.

FOLLOW US:Stay Updated with latest content - Subscribe us on
FOLLOW US:Stay Updated with latest content - Subscribe us on

“I think the worst is behind us," the CEO told analysts. “The auto business operating margin is back in the black so we’re making money on our core business again."

Renault reversed an initial advance to decline 2.2% at 11:40 a.m. in Paris trading. The stock is down about 9% since the start of the year and trails far behind gains in the Stoxx Europe 600 Automobiles & Parts index.

Lagging Rivals

Renault has lagged rivals Volkswagen AG and Stellantis NV because of its reliance on the European market, which has recovered more slowly than China or the US from the initial pandemic onslaught. The manufacturer’s lineup of lower-returning mass-market vehicles also offers fewer options compared to competitors that have prioritized making more lucrative models with what chips they have available.

Just over a year after de Meo took the helm, he told Bloomberg on Friday the automaker’s absence from the Chinese market is “unacceptable" and its global footprint should be broadened.

Automotive operational free cash flow was close to breakeven at negative 70 million euros. Japanese partner Nissan Motor Co. contributed 100 million euros to Renault’s bottom line after being responsible for much of the French carmaker’s record loss last year.

Higher prices for raw materials like steel are expected to hit the carmaker much harder in the second half, according to deputy-CEO Clotilde Delbos. The impact could be as high as 600 million euros, she said.

Renault sold 1.42 million vehicles worldwide in the first half, 19% more than last year but still down almost a quarter from the same period in 2019.

Shrinking Inventory

Inventories at the end of the latest quarter stood at 427,000 vehicles compared with 486,000 at the end of last year. Many carmakers have benefited from surging prices after the chip shortage reduced the amount of cars on dealer lots.

The pandemic has added to pressures on Renault stemming from overcapacity in its factories and problems at Nissan. Renault took a 5 billion-euro French state-backed loan last year and earlier this year sold its stake in Daimler for 1.14 billion euros to safeguard its credit ratings.

De Meo unveiled a turnaround plan in January that underwhelmed investors. The carmaker is targeting an operating margin of at least 5% by mid-decade compared with a 4.8% return in 2019. Stellantis, formed from the merger of Renault arch rival PSA Group and Fiat Chrysler, wants to generate a double-digit adjusted operating income margin by around 2026.

What Bloomberg Intelligence Says

Renault reported a much better than expected 1H Ebit margin of 2.8%, almost achieving its 2023 3% margin target -- which we always viewed as conservative -- that lays the foundation to upgrade its “Renaulution" 2025 plan goals. The 1H was good quality with enhanced pricing and cost savings, as well as free cash flow that came close to breakeven. Renault’s relatively new CEO still needs to address the company’s joint shareholdings with Nissan to unlock their value.

Renault is working to eliminate about 14,600 jobs worldwide and lower production capacity by almost a fifth in a bid to cut costs by more than 2 billion euros.

The carmaker has cut 1.8 billion euros of costs and said it now expects to reach a 2 billion-euro goal by year-end, ahead of schedule.

First Published Date: 31 Jul 2021, 09:55 AM IST
Recommended For You
View All
NEXT ARTICLE BEGINS

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city
By clicking VIEW OFFERS you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city