Renault Trims Revenue Outlook as Sales Slow, Costs Rise -- Update
October 17 2019 - 03:56PM
Dow Jones News
By Nick Kostov
PARIS -- Renault SA cut its revenue and operating-margin
guidance for the year, citing slumping sales outside Europe and
higher costs associated with developing cleaner car models.
The French auto maker said group revenue is expected to decline
between 3% and 4%, compared with previous expectations of revenue
close to last year's EUR57.42 billion ($63.44 billion). Renault
previously cut its revenue forecast for the year in July.
Renault also cut its outlook for its operating margin to around
5%, compared with a previous forecast of around 6%.
On the revenue side, Renault's acting CEO, Clotilde Delbos, said
some markets had been weaker than expected and that September
hadn't compensated for disappointing performance in July and
August. The company's business in Turkey and Argentina has caused
concern in recent months.
At the same time, spending on research and development hasn't
come down as quickly as the company had expected, pressuring its
operating margin, Ms. Delbos said.
Renault and its partner Nissan Motor Co. have been in a state of
upheaval since the arrest of Carlos Ghosn, the executive who forged
the alliance and served as chairman of both companies before his
detention in Japan last year.
Renault ousted its chief executive officer last week, replacing
him with current Chief Financial Officer Clotilde Delbos on an
interim basis. The Japanese car maker also replaced its CEO, Hiroto
Saikawa, with a triumvirate of executives earlier this month.
Like other auto makers, Renault is also grappling with a
slowdown in sales and rising investment to develop electric and
self-driving vehicles. European regulators are establishing some of
the strictest emissions regimes in the world, which, combined with
high labor costs, are squeezing regional auto makers' bottom
lines.
Renault was in merger discussions earlier this year with Fiat
Chrysler Automobiles NV, but a deal fell apart after the two car
makers failed to secure the explicit support of Nissan.
The company's automotive operating free cash-flow is forecast to
be positive in the second half of the year, while that isn't
guaranteed for the full year, the company said Thursday. Renault's
free cash flow was negative EUR716 million in the first half of the
year.
In addition to the outlook cuts, the company's new management
team will also review the company's midterm targets from its "Drive
the Future" strategic plan introduced in 2017.
Renault posted third-quarter revenues of EUR11.3 billion for the
third quarter, down from EUR11.5 billion in the same period the
year before.
Arndt Ellinghorst, an auto analyst with brokerage Evercore ISI,
said Renault's cut to guidance "paints a rough outlook on what
might come in 2020 when markets will more likely be tougher and CO2
rules will add significant incremental costs to the system."
--
Kim Richters
contributed to this article.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
October 17, 2019 15:41 ET (19:41 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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