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Renault embarks on post-Ghosn era with lower profit goal

Stock MarketsFeb 14, 2019 03:53AM ET
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© Reuters. FILE PHOTO - The logo of French car manufacturer Renault is seen at a dealership of the company in Illkirch-Graffenstaden near Strasbourg

By Laurence Frost and Gilles Guillaume

PARIS (Reuters) - Renault (PA:RENA) set a weaker full-year profit goal on Thursday, citing currency challenges and market uncertainties, as the French carmaker presented annual results without its recently ousted CEO Carlos Ghosn for the first time in 13 years.

Under new leadership since Ghosn's forced resignation last month over financial misconduct allegations, Renault targeted profitability of "around 6 percent" in 2019, compared with a 6.3 percent operating margin recorded last year.

Revenue and profit both declined as expected on the combined effect of currency setbacks, a withdrawal from Iran and a diesel sales collapse that hit engine production for Renault's alliance partner Nissan and affiliate Daimler.

The results nonetheless met Renault's own targets, including revenue growth before currency effects and an operating margin above 6 percent, on the way to its mid-term objective to exceed 7 percent in 2022.

"2018 was clearly a challenging year in which we faced expected as well as unexpected difficulties," new Chief Executive Thierry Bollore said, adding that the results "demonstrate the group's resilience".

Renault shares, which have lost about one-third of their value over the past 12 months, were up 3.8 percent at 58.84 euros as of 0840 GMT.

UNDER NEW MANAGEMENT

Bollore, formerly Ghosn's deputy, was promoted to CEO on Jan. 24, with outgoing Michelin (PA:MICP) boss Jean-Dominique Senard taking over the departed leader's role as chairman.

Ghosn faces trial in Japan after a Nissan internal probe uncovered evidence of misconduct including failure to declare more than $80 million in deferred income - straining relations with 43.4 percent-owner Renault. Ghosn denies wrongdoing.

Renault said on Wednesday it had blocked 30 million euros in deferred and severance pay to Ghosn, who had served as its CEO since 2005, and as chairman for almost a decade.

Underscoring challenges to alliance cooperation, Renault's sales to Nissan and other partners fell by 946 million euros ($1.1 billion) in 2018, reflecting collapsing diesel demand. A further negative impact is expected this year, the company said.

Nissan's contribution to Renault earnings came in at 1.51 billion euros, a 46 percent decline from 2017, when the Japanese carmaker's profit was inflated by one-off gains.

Renault's own cost-saving efforts in purchasing and manufacturing contributed 421 million euros to profit, a 37 percent decline.

Overall revenue fell 2.3 percent to 57.42 billion euros, while recurring operating profit dropped 6.3 percent to 3.61 billion. Net income amounted to 3.3 billion euros, down sharply from the 5.31 billion recorded in 2017, partly reflecting the exceptional year-earlier gain from Nissan.

Excluding currency effects, revenue would have risen 2.5 percent, Renault said. Analysts had expected recurring operating profit of 3.52 billion euros on revenue of 58.1 billion, based on the median of 12 estimates from an Infront Data poll.

The carmaker said it saw no need for any financial provisions in relation to the scandal and ongoing investigation into Ghosn's conduct and executive payments by Renault and the jointly owned Renault-Nissan BV alliance management company.

Renault embarks on post-Ghosn era with lower profit goal
 

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