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Renault upgrades outlook as turnaround plan starts to pay off
Global Banking & Finance Review®
Company
By Christian Lowe and Gilles Guillaume
PARIS (Reuters) -Carmaker Renault upgraded its full-year outlook on Friday, saying its turnaround plan to improve profitability was delivering results ahead of schedule.
Renault shares were up nearly 6% at 0745 GMT after the company said operating margins in the first half of this year were at 4.7%, against 2.1% in the same period last year. It upgraded its forecast for full-year margins to more than 5%.
That news offset the impact of Renault’s closure of its Russian businesses because of the Ukraine war, which resulted in the French company booking a net loss of 1.357 billion euros ($1.39 billion) in the first half.
Renault CEO Luca de Meo said the improving margins showed that a turnaround plan he initiated when he took over in 2020, focused on profitability over sales volumes, is yielding fruit.
He said the company is moving from plan’s emergency phase into a rebuilding phase.
“After two years of sacrifices and a hard diet, we are now ready for the next chapter at Renault,” he said on an analysts call after announcing first-half results.
De Meo said the company was three years ahead of schedule in hitting the plan’s targets despite challenges the entire sector faces in obtaining the microchips used in everything from brake sensors to entertainment systems.
Discounts on Renault’s cars are at their lowest in a decade, the CEO said, and higher-priced new models such as the Arkana compact SUV have improved profitability.
Renault achieved a 10-year high for cash generation in the first half of this year, de Meo said.
($1 = 0.9787 euros)
(Reporting by Gilles Gillaume and Christian LoweEditing by David Goodman)
Operating margin is a financial metric that measures the proportion of revenue left after paying for variable costs of production. It indicates how efficiently a company is managing its operations.
A turnaround plan is a strategy implemented by a company to improve its financial performance and operational efficiency, often after experiencing significant losses or challenges.
Cash generation is the process of producing cash flow from a company's operations, which is essential for funding business activities and investments.
Operating margins are calculated by dividing operating income by revenue, reflecting the percentage of revenue that remains after covering operating expenses.
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