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Customer LoginsSame-Day Analysis: Renault enjoys strong 2015 with net profit rising 48% to EUR2.96 bil.
Renault has enjoyed a positive financial result in 2015 as a result of a successful efficiency drive, a strong contribution from Nissan and robust sales in its core European market.
IHS Automotive Perspective
- Significance: Renault has posted a strong set of 2015 results thanks to improved performances in its his home European market and the successful implementation of its "Drive the Change" cost-cutting plan as well as an increased contribution from alliance partner Nissan, according to a company press release, with a 48% y/y rise in net profit to EUR2.9 billion.
- Implications: This figure was generated from revenues which rose 10.4% y/y to EUR45,327 million and new registrations which rose by 3.3% y/y to 2.8 million units. These numbers helped Renault hit its profit target as it recorded an operating profit margin of 5.1%.
- Outlook: Renault should be bolstered in 2016 by the launch of the new Mégane and the ongoing strong start in the market by the Kadjar crossover in the European market, but a repeat of the positive 2015 still relies on maintaining the ongoing strong development of the European market, while the company's interests in Russia are set to continue to be a drag on its profitability in 2016.
Renault has enjoyed a strong financial performance according to its annual results which were released today, with the firm posting a bottom-line net profit figure which rose 48.1% year on year (y/y) to EUR2.960 billion (USD3.348 billion). This strong result was generated off the back of group revenues which rose by 10.4% y/y to EUR45.327 billion and a rise in new registrations on a global basis to 2.8 million units. Operating profit also rose by 44.2% y/y to EUR2.320 billion, which was an operating profit margin of 5.1%, compared to the margin of 3.9% posted in 2014. This was in line with the long-term margin corridor that Renault is targeting as part of its current corporate cost-savings plan. Commenting on this Renault's CEO Carlos Ghosn said, "2015 results mark a decisive step towards the achievement of our plan 'Drive the Change' targets. The involvement of all our staff and the success of our vehicles allowed us to reach our operating margin target sooner than planned. We must now achieve our revenue target while maintaining a margin in excess of 5%."
The operating profit contribution of the Automotive division increased by 74.4% at EUR1,496 million (3.5% of automotive revenues versus 2.2% in 2014). Renault ascribed this improvement in performance to rising sales volume, which generated an operating profit increase of EUR480 million, and the success of the cost reduction programme which saved EUR527 million. However at the same time Renault also reported a negative effect on automotive operating profit of EUR379 million due to negative model mix and price effects.
The contribution of Renault's financing operation to the Group's operating profit amounted to EUR824 million, compared to EUR751 million in 2014. At the same time associated companies' contribution amounted to EUR1,371 million (versus EUR1,362 million in 2014) including Renault's Russian affiliate recorded a negative financial contribution as a result of the 35.7% y/y slump that the Russian passenger car market experienced during the year, with AvtoVAZ's Lada brand performing in line with the overall market slump with a 32.1% y/y decline in sales to 262,997 units.
This saw Renault book a EUR620-million loss, which was broken down into EUR395 million net loss (of which was EUR136 million in negative operating margin), while there was also an impairment loss on the value of the equity investment of EUR225 million, adjusted to the fall in the stock market value of AvtoVAZ shares. As of 31 December 2015, Renault's share in AvtoVAZ was valued at EUR91 million.
However, partly counterbalancing the negative contribution from AvtoVAZ, the contribution from Renault's alliance partner Nissan came to EUR1,976 million against a figure of EUR1,559 million in 2014.
Outlook and implications
Renault's management, the French government and other investors will be pleased with the company's 2015 financial results and the progress the company has made towards the achieving the core goals of its corporate cost-cutting and efficiency drive programme "Drive the Change". This, along with a strong contribution from alliance partner Nissan and the robust recovery in Renault's core Western European markets, have been key to the company's strong performance in 2015 which saw net profit rise by almost 50%. The company's sales in the EU28 grouping of countries rose at a healthy rate of 9.2% y/y in 2015 to 1,334,556 units, although this was almost identical to the full-year increase of 9.3%, so in effect equated to a tiny decline in overall share for Renault in its core market in 2015. However, as a solidly mid-market brand, Renault and Dacia did well to defend their share in their core market as premium OEMs continue to enter their traditional segments. Renault should continue to enjoy decent growth in Western Europe in 2016 with a further 6.8% y/y uplift forecast, bolstered by the roll-out of the new Mégane and the Renault Kadjar crossover. However, there will be further drags on performance elsewhere with declines expected in the Brazilian market, while Russia is expected to post another fall in the passenger car market from an already very low base of 5.3% y/y; this will again hurt Renault's extensive interests in the market. The fact that Renault's stake in AvtoVAZ is currently valued at EUR91 million shows how much value has been written off the company since Renault first acquired a 25% stake for around USD1 billion. While Russia remains a good long-term bet in terms of untapped potential, Renault will be regretting the timing of its investment in AvtoVAZ to some extent. However, with continuing improvement expected in China and India, in addition to its core European market, Renault sees an increase in Group revenue and a further improvement in its operating margin, which, despite the improvement in 2015, remains around half that of premium carmakers like co-operation partner Mercedes-Benz.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.