Does It Have More Chance To Succeed Than Commitment 2009?
Investors were impressed by Renault’s financial performance last year, but they were less enamoured of its new long-term plan which some dismissed as unambitious.
In 2013 Renault’s car manufacturing business raised operating profit to €1.2 billion from €780 million, thank mainly to its low-cost Dacia subsidiary with a bit of help from the Russian Avtovaz, and its 43 per cent stake in Nissan, and despite a currency hit of €620 million.
Renault CEO Carlos Ghosn outlined a new set of financial targets for for 2017 at a press conference to discuss 2013 results. The new plan includes raising sales to €50 billion and operating profits of five per cent, up from three per cent last year. This time the plan is called “Drive the Change.” The previous plan made in 2006, Commitment 2009, was ruined by the economic recession.
International Strategy and Investment analyst Erich Hauser was not impressed.
Not really new
“Not really a new target (for sales and margins) and we point out that Renault already hoped to achieve five per cent margin by 2013. Yes, markets were worse than expected but today’s plan presentation doesn’t really offer any particular original targets
One analyst remembered the failed previous plan.
“The new targets for 2017 are rather reminiscent of 2006 and the infamous and hollow “Commitment 2009” plan. The new five per cent margin target for 2017 was backed up by the statement that “we are aiming for much more” and with a claim that it assumes a totally flat European market. This margin target may be built on sand, just like the last one,” said Bernstein Research analyst Max Warburton.
Morgan Stanley analyst Laura Lembke has a positive view of Renault, saying the company is her top pick.
“Renault offers investors a unique mix of 1) exposure to EU recovery 2) cost savings potential as the Alliance enters a new era of cooperation and 3) attractive valuation as one of the cheapest global cyclicals,” she said.