By Gilles Guillaume and Nick Carey
(Reuters) -French automaker Renault (EPA:RENA) on Wednesday reported a slightly lower than expected full-year 2023 net profit, but posted margin and revenue gains and offered more cash to investors with a huge increase in its dividend.
Renault said it would propose a dividend of 1.85 euros ($1.98) for 2023, up from a payout of 0.25 euro for 2022, joining U.S. automakers Ford (NYSE:F) and General Motors (NYSE:GM) in giving more cash to investors.
The stronger cash position and margin growth are the latest sign that the carmaker's turnaround under Chief Executive Luca de Meo is bearing fruit.
To boost sales, Renault shrank its vehicle range and has refocused on its most profitable markets and models.
"The proposed dividend payout illustrates our confidence in our ability to continue to grow," Renault's chief financial offer, Thierry Pieton, told reporters.
Renault posted an operating margin of 7.9%, up from 5.5% in 2022. The company said it expected an operating margin of around 7.5% in 2024 and stood by its 2030 target of double-digit margins by 2030.
The results come after Renault reported 9% growth in global sales volumes for 2023 after four consecutive years of declines.
Bernstein analyst Daniel Roeska said the 7.9% margin was slightly above market expectations and he was encouraged by the 2024 guidance and a strong dividend on the back of healthy free cash flow.
Like other European carmakers, Renault has struggled with stiff competition from U.S. rival Tesla (NASDAQ:TSLA) and cheaper Chinese models at a time of waning sales growth and declining government support for electric vehicles.
The French carmaker is betting on new electric models in its battle on home turf, with plans to launch 10 new models this year, including two fully electric cars, the Scenic and the R5, and two hybrids.
"These results (...) reflect the success of our Renaulution strategy. Our fundamentals have never been stronger, and we will not stop there," de Meo said in a statement.
Still, de Meo's overhaul hit a speed bump last month when the company abruptly scrapped plans to list its EV business, Ampere, citing unfavourable market conditions.
The IPO had been a pivotal part of his strategy aimed at extracting more value from the business and separating it from the combustion engine operation, called Horse.
Creating Horse contributed about 90 basis points to the 2023 margin boost.
De Meo is also under pressure to revive the company's value: its 11 billion-euro market cap is much lower than its European rivals and 12-month forward price-earnings ratio - a key metric for valuing shares - at 2.9, also the lowest in the sector.
For 2023, the automaker posted a net profit of 2.315 billion euros ($2.48 billion) versus a loss for 2022 of 716 million euros, which included the automaker's exit from Russia.
The net profit missed an average estimate of 3.52 billion euros from analysts polled by LSEG.
The consensus did not include a capital loss of around 900 million euros resulting from its disposal of a first chunk of its stake in Nissan (OTC:NSANY).
Revenue for 2023 rose 13% to 52.38 billion euros. Analysts had expected revenue of 52.88 billion euros.
($1 = 0.9323 euro)