Renault expects margin to improve as H1 net loss highlights new CEO's task

Renault expects margin to improve as H1 net loss highlights new CEO's task

Renault's Financial Performance and Outlook

By Gilles Guillaume

First Half Results

PARIS (Reuters) -Renault expects its operating margin to rebound in the second half, its finance chief said on Thursday, as a first half net loss due to a Nissan writedown and tough market conditions highlighted the challenge facing its new CEO Francois Provost.

CEO's Strategic Vision

The French carmaker reported a first-half net loss attributable to the group of 11.19 billion euros ($13 billion), including a one-off 9.3 billion euros from writing down its investment in partner Nissan flagged earlier this month.

Market Challenges and Opportunities

Its shares were down 1.8% at 32.6 euros by 0815 GMT.

Renault lowered its annual forecast earlier this month after market conditions deteriorated, particularly in the commercial vehicle market.

The group, whose sales volume growth slowed to 1.3% in the first half, now expects an operating margin of around 6.5% in 2025, compared with at least 7% previously targeted, and free cash flow of between 1.0 billion and 1.5 billion euros, compared with at least 2 billion euros previously anticipated.

First-half revenue was 27.6 billion euros, up 2.5% compared with a year earlier, helped by several new product launches, though its operating margin fell 2.1 percentage points to 6%, in large part due to weakness in vans.

CFO Duncan Minto told reporters that he expects the operating margin to rebound in the second half, nearing the level of the same period last year, or 7.1%, thanks to a reversal of the negative effect of the separation from the group of the internal combustion and hybrid engine business Horse.

Renault has brought in new investors to the unit, China's Geely and Aramco, to share costs and gain agility.

"We will benefit in the second half from lower costs than when we manufactured the engines ourselves," said Minto.

RESULTS 'NOT ALIGNED' WITH INITIAL AMBITIONS

Excluding the hit related to Nissan, its net income attributable to the group reached 461 million euros, less than a third of a year ago's level, due to the weaker van market, costs associated with electric vehicles and commercial pressures in a more competitive environment.

"Our first-half results, in a challenging market, were not aligned with our initial ambitions," said Provost, appointed new CEO of the group late on Wednesday.

"Nevertheless, Renault Group's profitability remains a reference in our industry, and we are determined to maintain this standard," he added in a statement.

Financial details already released earlier this month confirmed that "pricing benefits have now peaked and growth outside Europe diluted (the) mix", said analysts at Jefferies in a note.

While international expansion will help reduce Renault's dependence on a sluggish European market, models sold outside Europe are often sold at lower prices, and the company said its geographic mix had a negative 1.1 percentage point impact on revenue growth.

"New CEO Francois Provost's insider experience should help address both operations and strategy," added Jefferies.

($1 = 0.8754 euros)

(Reporting by Gilles Guillaume and Dominique Patton; Editing by Jacqueline Wong and Emelia Sithole-Matarise)