Renault SA expects to boost returns this year on the back of a record order book and new models as it navigates high inflation and lingering supply-chain problems.
(Bloomberg) — Renault SA expects to boost returns this year on the back of a record order book and new models as it navigates high inflation and lingering supply-chain problems.
The manufacturer forecast a group operating margin at or above 6% in 2023, compared with 5.6% last year, it said Thursday. Renault will also reinstate paying a dividend for the first time in four years with a payout of 25 euro cents a share after getting traction on its turnaround plan.
“Renault Group’s fundamentals have been thoroughly cleaned up and there will be no turning back,” Chief Executive Officer Luca de Meo in a statement. The “2023 financial outlook and the return of a dividend illustrate this.”
Free cash flow is expected at or above €2 billion ($2.1 billion), Renault said, compared with a record €2.1 billion last year. The shares rose as much as 1.8% in early Paris trading, taking gains in the first few weeks of the year to 40%.
The automaker is emerging from a tumultuous twelve months marked by a costly withdrawal from Russia and a landmark deal to reshape its troubled alliance with Nissan Motor Co. While crippling chip shortages are easing, Renault still faces logistics troubles paired with a weakening outlook in Europe, its mainstay market.
In November, Renault outlined new mid-term targets for an operating margin of more than 8% in 2025 and above 10% by 2030. The French automaker has been revamping its model lineup including higher-returning trims. Orders for new models such as the all-electric Megane e-tech, Arkana and Dacia Jogger and and high prices helped boost automotive revenue last year, Renault said.
Group revenue during 2022 rose 11% to €41.7 billion with operating income more than doubling to €2.2 billion. Orders at the end of last year for Europe were equivalent to three-and-a-half months of sales, the company said.
The results “significantly beat expectations,” Pierre-Yves Quemener said in a report, noting robust vehicle prices and new models delivering a bump to earnings.
Shortage Struggle
Last year, semiconductor shortages shaved production by about 300,000 with carmakers including Volkswagen AG still struggling to source enough of the components. It reads a bit as though they’re selling fewer high-priced cars. Maybe: The company, like its peers, has prioritized production of its higher-priced vehicles as factories ground to a halt. Manufacturers have been pointing at stretched order books to cushion any slowdown with growing questions over when consumers pummeled by a cost-of-living crisis might start to cancel on long-standing deals.
CEO de Meo is moving ahead with a split of the business in five units as he seeks outside investors to help fund a costly shift to electrification. This month’s agreement with Nissan will also allow the company to proceed with plans to work with new partners, such as China’s Zhejiang Geely Holding Co.
Renault is planning an initial public offering of its carved-out electric-vehicle business in Paris as soon as the second half this year, depending on market conditions. The stock is the top performer in Europe’s Stoxx 600 Automobiles & Parts Index, giving Renault a market value of €13 billion.
(Updates with shares in fourth, analyst comment in eighth paragraph. An earlier version of this story corrected the headline)
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