Renault CEO Ghosn postpones profit goal again

Ghosn: Targets 'ambitious yet realistic.'
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PARIS -- Renault CEO Carlos Ghosn's latest revenue and profit targets for the automaker have sparked mixed reaction from analysts, some saying the company was playing it safe while others were more skeptical.

Ghosn aims to increase revenue by about 25 percent to 50 billion euros in 2017, a year later than originally planned, and to boost operating margin to 5 percent, up from 3 percent last year.

The 2017 targets are "ambitious yet realistic," Ghosn said in a statement presenting the company's 2013 financial results on Thursday. "Our strategy laid out in the first part of our plan Drive the Change has delivered results," he said.

But analysts offered differing opinions on Ghosn's projections.

"I think they are realistic and actually rather conservative and are seemingly baking in plenty of margin for error," said Erich Hauser of International Strategy & Investment Group. "They're assuming that Europe, in demand terms, doesn't grow over the planning period, which I too would consider to be a very conservative assumption."

Philip Watkins of Citi noted that there already was a consensus of a 4.6 percent margin by 2015.

But Bernstein Research analyst Max Warburton, who remains bullish on Renault's stock, greeted the guidance with skepticism.

Ghosn's targets for 2017 "are rather reminiscent of 2006 and the infamous and hollow Commitment 2009 plan," Warburton said in a note. "The new 5 percent margin target for 2017 was backed up repeatedly by the statement that 'we are aiming for much more' and with a claim that it assumes a totally flat European market. This margin target may be built on sand, just like the last one."

Renault's global vehicle sales were 2.63 million last year, below the 3 million originally pledged. Ghosn also missed announced targets of 3.3 million vehicle sales and a 6 percent margin for 2009. Renault gave no new volume targets on Thursday, promising instead to maintain positive cash flow every year.

New products

The carmaker will begin sales of its latest Twingo minicar at the end of the year, Ghosn confirmed on Thursday.

Hauser said the Twingo will add little to Renault's earnings because of the low margins on such cars. More important will be the introduction of the updated Megane compact, which competes against the new Peugeot 308 and the segment leader, the Volkswagen Golf. The Megane won't make it to showrooms for two years.

"Management said that they will be losing ground to the 308 and Golf until there's a replacement for the Megane available," Hauser said. "Once it's fully available, this should help the company get closer to its margin target."

Ghosn told analysts on Thursday that he did not expect a big impact on Renault from PSA/Peugeot-Citroen's impending stock deal with Chinese carmaker Dongfeng Motor. Renault said in December that it was building a plant in China with Dongfeng.

Dongfeng, which has arrangements with several carmakers, has traditionally been "very compartmentalized," Ghosn said.

Said Hauser: "Renault-Nissan understands that PSA needs this deal to happen. If PSA were to fall and would need to be bailed out, this could disrupt pricing again in Europe and cause negative effects for other OEMs. So by getting Dongfeng involved you avoid a disorderly rundown in PSA."

Reuters contributed to this report.

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