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.August 06, 2003
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Renault reports sharp rise in net income and operating margin of 3.2%
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In a less buoyant economic environment, Renault reported operating margin of 3.2% of revenues, or 588 million, for first-half 2003 compared with 4.8% in first-half 2002. This performance, which was expected, is on a par with second-half 2002 and demonstrates Renault's ability to withstand weaker economic conditions. ??Net income grew by over 30% to 1,177 million, compared with 894 million in first-half 2002, largely driven by a sharp rise in Nissan's earnings. Net financial indebtedness contracted to 2,214 million from 2,495 million at end-December 2002. Worldwide sales of passenger cars and light commercial vehicles by the Renault group, including Dacia and Renault Samsung Motors, fell 4.5% to 1,224,953 units in first-half 2003 compared with 1,283,004 for the same period in 2002. |
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In Western Europe, where the market contracted 2.6%, sales were off 6.8% mainly due to an unfavourable market mix and the renewal of several models, including Sc้nic and Kangoo. Nevertheless, Renault consolidated its ranking as the leading brand in Europe, both for passenger cars and light commercial vehicles. And in June, the weaker trend observed in the early months of 2003 was turned around by the success of new models, such as the M้gane II three- and five-door hatchback and Espace IV, and by the initial impact of the launch of Sc้nic II at the end of the period under review.
Outside Western Europe, sales grew 4.4% relative to first-half 2002, reaching 272,357 units. Although operating conditions remained tough in Brazil and Argentina, the group benefited from buoyant demand in Central and Eastern Europe, Russia and Mexico, as well as from the pick-up in the Turkish market. Renault Samsung Motors and Dacia both continued their advance, growing sales by 10.6% and 14.8% respectively.
On a consistent accounting basis, revenues for the period amounted to 18,653 million, down 2.1% on first-half 2002. The revenue contribution of the Automobile Division dipped 2.4% to 17,668 million, mainly reflecting weaker sales volumes and the negative impact of the stronger euro. On the plus side, Renault benefited from a better price and product mix and a steady increase in sales of components to Nissan. The contribution of the Sales Financing Division rose 4% from first-half 2002 to 985 million.
Net income up 283 million
Operating margin was 3.2% of revenues, or 588 million, compared with 4.8% and 912 million in first-half 2002 and 3.3% in second-half 2002. Operating margin remained virtually stable relative to H2 2002 despite the negative effects of a strong euro, an unfavourable market mix and the phasing-out of Sc้nic I. The main reasons for this resilience are the success of new models (M้gane II and Espace IV), further cuts in purchasing costs, a firm grip on overheads and a stronger performance in the sales financing business. At the end of the period under review, Renault's operating margin was beginning to reflect initial billings for Sc้nic II and full capacity of Espace IV production.
Other operating income and expenses produced a charge of 170 million, compared with 101 million in first-half 2002. This includes a 49 million expense for the discontinuation of Avantime and a charge of 60 million for an adjustment to the provision for additional vacation entitlements. As a result, operating income amounted to 418 million, compared with 811 million in first-half 2002.
Financial items netted to a 34 million expense, compared with 53 million in firsthalf 2002. Renault's share in the net income of companies accounted for by the equity method trended upward, reaching 936 million compared with 454 million in firsthalf 2002. As previously announced, Renault benefited from a sharp increase in the earnings of Nissan, which contributed 859 million. The equity-accounted contribution of AB Volvo was a positive 91 million, compared with 51 million in first-half 2002. Other equity-accounted affiliates generated a loss of 14 million, compared with a loss of 22 million in first-half 2002. The group's pre-tax income for the period was 1,320 million, compared with 1,212 million in first-half 2002.
In first-half 2003, current and deferred taxes produced a net charge of 129 million, compared with 285 million in first-half 2002. After taxes and minorities, Renault's net income was 1,177 million, compared with 894 million in first-half 2002. Earnings per share worked out to 4.43, compared with 3.53 in first-half 2002.
Stronger balance sheet
The group continues to strengthen its financial structure. The net financial indebtedness of the automobile business contracted by 281 million to 2,214 million at end-June 2003. This was made possible by sound management of investments and a strongly positive currency effect.
Group shareholders' equity grew from 11,828 million at December 31, 2002 to 12,402 million at June 30, 2003. Gearing is down from 21.1% at end-2002 to 17.9% at June 30, 2003.
Outlook for 2003
The gradual improvement in Renault's performance during the first half will continue in the second half with the rollout of new M้gane models. Renault expects to increase ist market share and operating margin in the second half as a result of these developments.
In 2003, Renault aims to achieve an operating margin of between 3.5% and 4% and higher net income than in 2002, in spite of a European market down by 3% to 4% and an even sharper decline in the French market, and given the current exchange rates. The operating margin should continue to improve in 2004, except in the case of a change in the economic environment.
(July 24, 2003)
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