Renault SA pushed out the likely timing for a listing of its electric-vehicle arm following investor feedback while sweetening the wait upgrading its earnings outlook for the year.
(Bloomberg) — Renault SA pushed out the likely timing for a listing of its electric-vehicle arm following investor feedback while sweetening the wait upgrading its earnings outlook for the year.
The carmaker will hold the initial public offering of the Ampere unit in the “most favorable window,” which will most likely be the first half of next year, Chief Financial Officer Thierry Pieton said Thursday.
Previously the company said the share sale in the Ampere unit could happen as early as the end of 2023.
Renault rose 4.9% higher as of 9:45 a.m. in Paris trading, the top-performing stock in France’s benchmark CAC 40 Index.
The move helps buy some time for Renault, which upgraded earnings expectations despite softening markets in Europe, while heavy price cuts by Tesla Inc. put pressure on its flagship EV, the Megane E-Tech. Renault said strong sales momentum from some new models like the Austral crossover and lower costs helped boost its expectations.
Group operating margin is now expected at as much as 8%, up from a previous goal of 6% or higher, even as the European market remains “relatively challenging,” Pieton said on a call with analysts. That’s higher than analyst expectations of 6.2% for this year.
Automotive operational free cash flow will be at or higher than €2.5 billion ($2.7 billion), compared with €2 billion or more previously, Renault said.
What Bloomberg Intelligence Says:
Renault’s upgraded 2023 operating margin guidance of 7-8% from above 6% highlights its price discipline and strong order books and could lead to a 25% uplift to consensus, we believe. This bodes well for 2Q sector earnings, though pricing remains a risk for 2H given macro uncertainty. A partial negative is a delay to an Ampere IPO by six months to 1H24.
— Michael Dean, BI automotive analyst
The new guidance is “materially better” than the company’s previous targets, Bernstein analyst Daniel Roeska wrote in a note. Renault now has “the option to wait for ideal timing” with regards to the Ampere initial public offering, he said.
Also likely holding back the IPO is a slight delay to the electric R5, which will now be introduced in the third quarter next year, a few months later than previously expected.
New Models
Renault is introducing 18 new models between now and 2025 to boost market share and gain momentum in the EV transition. Nearer-term, buyers are grappling with high inflation, particularly in the manufacturer’s main market in Europe.
Renault Chief Executive Officer Luca de Meo is under pressure to deliver on an ambitious turnaround plan that involves splitting the business in various entities. The company aims to complete the complex carveout of Ampere in the second half.
It’s also completed the separation of its powertrain operations as part of a plan to fold legacy assets into a joint venture with China’s Zhejiang Geely Holding Group Co. and Saudi Aramco. The new Renault powertrain entity starts operations on July 1.
Renault, due to release first-half results on July 27, is still in negotiations with Japanese alliance partner Nissan Motor Co., with whom talks have accelerated of late. Closing of a landmark rebalancing deal will take place in the fourth quarter at the earliest, Pieton said.
Read more: Nissan, Renault Talks Accelerate With Deal on EV Unit Nearing
(Updates with analyst comment in seventh paragraph, details on powertrain operations carveout in 12th.)
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