Investors Will Be Hoping It Has More Success Than Commitment 2009
Renault investors are getting ready for the new three-year plan, due to be announced on February 10, 2011.
They will be hoping that CEO Carlos Ghosn’s new long-term project has more success than the last one, which crashed and burned during the recession. That plan – Ghosn’s “Renault Commitment 2009” – included the pledge to become Europe’s most profitable car company by 2009, boost annual car sales by 800,000 vehicles and raise profit margins to 6%.
In the event, Renault lost €3 billion in 2009, compared with a profit of €600 million the previous year.
Deutsche Bank and Bank of America Merrill Lynch are both seeing positives for Renault.
Merrill Lynch has made Renault its so-called “top pick” among mass car manufacturers, saying its auto division’s margins should hit 1.9 per cent in 2011, up from its previous estimate of 1.5 per cent.
Deutsche Bank points out that when it values the Renault-Nissan alliance, the French company’s share is precisely zero. But it has hopes for the future, despite Renault’s core business being barely profitable now, and the fact that 2011 looks to be challenging. 2011 should be helped by –
· The Dacia lineup should continue to grow in West Europe.
· Light commercial vehicles should recover further.
· South Korea, Russia and Latin America should do well.
· Electric car launches should generate showroom traffic and free advertising.
Deutsche Bank reckons Renault operating profit margins should hit 2.3 per cent in 2011.
“We do not see any reason why Renault shouldn’t target a five per cent operating profit margin – equivalent to €1 billion free cash flow. We think this should be the main focus of the plan,” said Deutsche Bank’s Gaetan Toulemonde.
Meanwhile Renault announced a plan to allow 3,000 workers in France to retire early, and said most French plants will be closed for three weeks in December including Sandouville – (Espace, Laguna), Flins (Clio) and Douai (Scenic). Deutsche Bank said this plant closing wasn’t good news, but pointed out they only accounted for about 420,000 vehicles, while Romania (320,000 Dacias), Turkey (350,000 Clios and Meganes), Slovenia (210,000 Twingos), Palencia, Spain (270,000 Meganes) and Maubeuge, France (200,000 Kangoos) are all running flat out.
Neil Winton – December 1, 2010