First signs of improvement for Renault

Posted on Oct 23, 2020 at 8:44 amUpdated Oct 23, 2020, 12:12 PM

Things are (a little) better for Renault. After catastrophic half-year accounts, marked by a record loss of 7 billion euros, the manufacturer in Losange reported, Friday, a quarterly turnover still in decline, but some signs of improvement and the first effects from the strategy driven by Luca de Meo, the new boss appears.

From July to September, the group’s turnover fell 8.2% to 10.37 billion euros. At constant exchange rates and perimeter, the decrease is 3.2%. Admittedly, the group continued to lose market share: its overall sales fell by 6.1%, to 806,000 vehicles, while the world market yielded at the same time only 4%.

Favor margins over volumes

But this decline is mainly explained by the collapse of sales in Brazil (- 50.9%) “due to the sharp decline in the market and the development of commercial policy favoring profitability over volumes,” said the press release. Press. The first translation of Luca de Meo’s desire to reduce risks in certain countries, and to focus on margins rather than “pushing hard”, according to the expression used in the sector.

Group sales continued to grow in Russia, its second largest market (+ 4.5%). As in Turkey, with a sales jump of 131% which remains however lower than the meteoric upturn in registrations in the country (+ 178%).

Better in Europe

It is especially in Europe, where Luca de Meo sees the most potential to turn the group around, that the situation is encouraging. In this extremely competitive market, the group saw its market share increase by 0.2 point in the third quarter, to 10.3%, with 400,223 vehicles sold, thanks to lower sales (-2.9%). than that of its competitors. The recovery is particularly noticeable on the French market, where the group has seen its registrations increase by 2.7% over the last three months.

The decline in revenues is also explained, up to 3.3 points, by the drop in sales to partners. Renault has also indicated that it will stop producing the Fiat Talento van on behalf of the Italian manufacturer, provided by the Sandouville plant since 2016, due to the upcoming merger of Fiat Chrysler with PSA. “Sales to partners will continue to slow and then stabilize at a low level, until we have been able to sign new contracts,” said financial director Clotilde Delbos.

Guaranteed loan drawn at 60%

Another source of satisfaction: with 27,000 units sold in the quarter in Europe, ZOE continued its excellent year. Its sales increased by 157% over one year, while the 100% electric car market only climbed “only” 107.2%. This places the group “in line” with the CO2 emissions reduction targets to be achieved in 2020 to avoid a fine from Brussels. the Losange even hopes to take advantage of its advance to involve other manufacturers in the “pool” that it is already forming with Nissan and Mitsubishi, and thus garner some liquidity in exchange for CO2 credits.

Clotilde Delbos insisted on the solidity of the financial situation. Renault burned 1.6 billion euros in cash over the period, having had to replenish its working capital requirement and repay short-term debts contracted during confinement. But liquidity reserves still stood at 15.2 billion at the end of September, including the loan of 5 billion euros guaranteed by the State, of which 3 billion were drawn at the end of September.

The leaders of the Losange are confident about the end of the year. They hope in particular to generate a positive operational free cash flow for the automotive branch in the second half of the year – excluding new health measures which would again shake up the market.

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