Renault sees solid margin in 2024 as 10 new models are launched

Renault is forecasting resilient returns this year as the automaker overhauls its lineup to counter muted demand for electric vehicles.

The company sees an operating margin of at least 7.5 percent in 2024, compared with 7.9 percent last year.

Renault plans to introduce 10 new models this year including the key all-electric R5, a new Scenic and the Rafale.

CEO Luca de Meo, who has been revamping Renault since assuming the post in 2020, is focusing on reducing the cost of new EVs via partnerships after scrapping a plan to sell shares in its EV and software business, Ampere.

The IPO project faced headwinds including Tesla's frequent price cuts and increased competition from Chinese manufacturers.

Renault is not expecting growth in the automotive markets in Europe or Latin America this year and is projecting free cash flow of at least €2.5 billion ($2.7 billion) in 2024, compared with €3 billion last year

"We remain cautious on the volumes front," Chief Financial Officer Thierry Pieton told reporters on Wednesday. "We will be replacing vehicles with a certain margin level with new ones that are much more profitable."

Pieton said raw material prices turning positive in the second half would continue to help in 2024.

Higher profit margin

For 2023, the automaker posted a net profit of €2.32 billion euros ($2.48 billion) versus a 2022 loss of €716 million, which included the automaker's exit from Russia. The net profit missed an average estimate of €3.52 billion from analysts polled by LSEG.

Its 2023 operating margin of 7.9 percent was up from 5.5 percent in 2022. The company stood by its target of double-digit margins by 2030.

Group revenue rose 13 percent to €52.4 billion last year -- slightly below analyst estimates -- amid robust growth in the company’s main market, Europe, and success selling more expensive vehicles such as the Megane E-Tech compact.

The company proposed a dividend of €1.85 per share, its highest dividend since the one paid out in 2019.

The stronger cash position and margin growth are the latest sign that the automaker's turnaround under de Meo is bearing fruit. To boost sales, Renault shrank its vehicle range and has refocused on its most profitable markets and models.

De Meo is also under pressure to revive the company's value: its €11 billion 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.

Renault, which loosened ties with longtime Japanese partner Nissan last year, has been holding talks with rivals including Volkswagen about possibly sharing the cost of developing a platform for more affordable EVs.

"Investors will be looking out for any more details on Renault’s plan to sell more Nissan shares in 2024, and how they plan to use that cash," Bernstein analysts said.

The automaker also is pooling its combustion-engine assets with China’s Zhejiang Geely Holding.

Reuters contributed to this report