The decisions Renault has made on its Renaulution plan over the past few months are finally paying off. Despite a sluggish car market and declining sales, the manufacturer presented one stable half-year sales (+0.3%) at 21.1 billion euros. Better still, it shows an operating margin of 4.7%, demonstrating the group’s ability to improve its profitability across every segment and model sold.
As a result, the stock price rose nearly 7% at Friday’s open. The title is traded at over 29.3 euros.
This progress is all the more beneficial for the group, led by Luca de Meo since July 2020, given the particularly deteriorated context. Shortage of semiconductors, sale of the activities of the subsidiary Avtovaz and models of the Lada brand in Russia, rising energy and raw material prices and finally rampant inflation, which is slowing down plans to buy household vehicles. The manufacturer’s sales are also down 12%. (excluding Russia) in the first six months of the year.
The group has improved margins by selling its vehicles at higher prices, higher trim levels and fewer discounts. Net income from continuing operations for the half year was €657 million. Renault thus communicates a “significant improvement in profitability, strong generation of free cash flow and (a) strengthening of the financial structure”.
Solid SUV results
Also the launch of new models like the Renault SUV Arkana, the Dacia Jogger station wagon and the electric Megane E-Tech helped improve those numbers.
The Dacia Sandero remains the best-selling personal vehicle in Europe, all manufacturers combined. And the group’s backlog is at a “record” level of 4.1 months of sales on the continent, Renault’s key region..
The manufacturer has slightly raised its 2022 guidance and is now targeting an operating margin of 5%, in line with its long-term goals.
Keep margins in a degraded context
He still has to contend with the deteriorating environment, which is expected to continue as the specter of a recession looms over the European market. The increase in raw material prices also weighed on the balance sheet by 797 million euros, partially offset by purchasing savings of 167 million euros.
Russia’s judgment also weighed on the bill. The manufacturer reported a net loss of 1.6 billion euros for the first half of the year, compared to a net profit of 368 million euros for the same period in 2021.
Renault must also continue to invest in the electric market, which will become the norm in the European Union in 2035. Electric and hybrid vehicles currently account for 36% of group registrations, compared to 26% in the first half of 2021.
Finally, the group has repaid in advance one billion euros of the loan guaranteed by the French state, paid at the beginning of the Covid-19 epidemic. Now she wants to pay back another billion in the second half of the year, by the end of 2023 at the latest one last billion.