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Renault's Operating Performance Improves
French Renault posted Thursday a 7.6 percent dive in full-year net income. It decrease reflects smaller equity contributions from AB Volvo and Nissan Motor Co. Ltd. However, the automaker is pleased to announce that its operating performance improved.
Net profit fell to €2.73 billion in 2007 from €2.96 billion in 2006. But according to a panel of 21 analysts polled by JCF Online, the net profit was still well above an average estimate of €2.6 billion. Additionally, revenue surged 1.8 percent to €40.68 billion in the previous year from a restated €39.97 billion in 2006.
The French automaker also reported a 27 percent increase in operating margin in 2007. The increase is mainly attributed to brisk sales abroad, cost compression, and high demand for light commercial vehicles.
According to the Wall Street Journal, operating margin as a percentage of sales rose to 3.3 percent last year from 2.6 percent in 2006, an improvement from the three percent forecast Renault reported last year. The automaker also confirmed its guidance for a 4.5 percent operating margin this year. The same is en route to a six percent margin in 2009 for the company’s much-awaited return to profitability in a matter of four years. Operating profit surged €1.24 billion last year from €877 million a year before.
Renault Chief Executive Officer Carlos Ghosn said the automobile market will be significantly tougher this year than in 2007 due to the darkening global economic outlook. However, the CEO promised that Renault will be able to grow its vehicle sales by at least ten percent this year.
"We devoted ourselves to improving quality," said Ghosn. "2008 will be the year for growth." The European market should be stable this year, he added. Earlier, Ghosn said the company will increase sales by 800,000 vehicles between 2005 and 2009.
The maker of the efficient Nissan wheels, in which Renault has a 44 percent equity interest, supplied €1.29 billion to Renault's bottom line in the previous year, down from €1.89 billion in 2006. Thierry Moulonguet, the company’s chief financial officer, said that one-third of the decline reflected the depreciation of the Japanese yen.
Ghosn said the Twingo mini-car is selling well, but the CEO intimated some "concerns" about the new Laguna executive sedan. The car, introduced last autumn, has been launched into a market segment that is shrinking faster than Renault had predicted, he added.
Another worry is the shift in preference of customers. They want smaller engines or diesel versions. Ghosn noted, makers of diesel engines are struggling to keep up with demand and inventories of unsold Lagunas are tending to build up.
"We don't want to be in a situation where we have to start pushing Laguna sales," Ghosn said. This is why the automaker’s plant at Sandouville in western France, which builds Lagunas, has to slow production.
About the Author
Anthony Fontanelle is a 35-year-old automotive buff who grew up in the Windy City. He does freelance work for an automotive magazine when he is not busy customizing cars in his shop.