Renault beats profit forecast, warns on EU emissions rules

By Gilles Guillaume and Dominique Patton

PARIS(Reuters) -French automaker Renault reported a record operating profit for 2024 on Thursday, slightly beating expectations, as lower costs and a string of new launches boosted margins.

The company, one of the few in the sector to have maintained its targets last year, reported operating profit of 4.3 billion euros ($4.49 billion), up 3.5% on the previous year, and above a company-compiled consensus forecast of 4.2 billion euros.

Its revenue rose 7.4% to 56.2 billion euros, well ahead of the expected 54.5 billion euros, driven by launches including the popular compact electric R5 and a range of new hybrids.

Its shares slipped in early trade, but had gained 9% since the start of the year and JPMorgan analysts described the results as "a strong set of numbers".

They contrasted with premium car maker Mercedes-Benz, which on Thursday reported a 40% slump in 2024 earnings, and launched a fresh cost-cutting plan to revive sales and margins in 2025.

Renault shares were down 0.4% at 0923 GMT.

The French carmaker reported an operating margin for 2024 of 7.6%, meeting its target of at least 7.5% for the year. However, it lowered margin expectations this year to at least 7%, noting that tough new European carbon emissions targets would erode 1 percentage point from its margin, equivalent to about 500 million euros of operating profit.

The company remains "hopeful" the rules will be relaxed, CFO Thierry Pieton told journalists, but was not counting on that for its financial forecasts.

It expects to spend on discounts to sell more electric vehicles while also raising the prices of petrol cars to help it meet the targets, he said.

The company continues to rule out pooling its emissions with other car makers for now.

"We consider it a bit surreal that we have to pay money to non-European competitors," CEO Luca De Meo told analysts, describing Renault's as a "smarter strategy".

Renault was one of the only major car manufacturers that did not issue a profit warning last year, as a global decline in demand for new cars and operational issues hit larger peers like Volkswagen and Stellantis hard.

Top European automaker Volkswagen warned on profit twice last year, while Stellantis issued a profit warning in September after struggling to turn around poor performance in the U.S., leading to the resignation of its CEO months later.

Renault has so far stuck to its targets, helped by an overhaul of its manufacturing layout and strategy started in 2020.

Under de Meo's leadership since July 2020, Renault has joined up with other companies to share investment costs, and also revamped its vehicle lineup, launching 10 new models in 2024 with plans for seven more this year.

Costs decreased by almost 800 million euros in 2024, with about 500 million in procurement savings on top of lower raw material costs.

However, 2024 net income on a group share basis fell to 752 million euros from 2.2 billion euros a year earlier after accounting for disposal of shares in Japanese automaker Nissan, a partial impairment on its investment in the firm, and a much lower contribution from its earnings.

De Meo said the company will continue to reduce its shareholding in Nissan at "the right time", taking care not to destroy the value of assets built together.

Renault said it would pay a dividend of 2.2 euros, compared to 1.85 euros for 2023.

($1 = 0.9585 euros)

(Reporting by Gilles Guillaume and Dominique Patton; Editing by Varun H K and Susan Fenton)