Renault shares slump as profit warning adds to its woes

Renault's interim chief executive Clotilde Delbos and chairman Jean-Dominique Senard at the French carmaker's headquarters last week. Renault says sales are likely to drop between 3 per cent and 4 per cent this year.
Renault's interim chief executive Clotilde Delbos and chairman Jean-Dominique Senard at the French carmaker's headquarters last week. Renault says sales are likely to drop between 3 per cent and 4 per cent this year.PHOTO: REUTERS

French carmaker and its partner Nissan struggling amid signs of global auto industry slowdown

PARIS • A profit warning sent Renault's shares as much as 15 per cent lower yesterday, capping a turbulent year for the French carmaker since the arrest of long-time boss Carlos Ghosn, and adding to signs of a sharp global auto industry slowdown.

Renault and Nissan both announced leadership changes last week, seeking to reboot their alliance that was thrown into crisis last year by the arrest of Ghosn in Tokyo on financial misconduct charges, which he denies.

But the companies are struggling amid a global slowdown and a fall in emerging-market demand, with pressures also coming from tougher emissions regulations in Europe and the need to invest in electric and self-driving technologies.

Rivals including Daimler and French Peugeot-maker PSA are set to add to the picture next week in sales updates, while Swedish truckmaker Volvo yesterday reported a sharp drop in orders.

Renault said late on Thursday that sales were likely to drop between 3 per cent and 4 per cent this year, compared with its previous forecast for a similar outcome to last year. It blamed difficulties in Argentina and Turkey in particular.

The company also said its operating margin was set to come in at 5 per cent, versus a previous 6 per cent goal, as it struggles to keep a lid on research and development costs.

Analysts, who said they had expected sales targets to be revised, added that the margin guidance, equivalent to a steeper-than-expected €500 million (S$760 million) to €600 million cut to Renault's operating profit, was the main shock.

"Renault guiding down for the full year should not be a major surprise, although the magnitude is," said analysts at Jefferies in a note.

WORSE THAN EXPECTED

Renault guiding down for the full year should not be a major surprise, although the magnitude is.

ANALYSTS AT JEFFERIES

Renault shares dropped to a six-year low of €46.7 and at 0955 GMT (5.55pm Singapore time) were down 12.3 per cent at €48.11.

While Renault is not alone in suffering from an auto market downturn, its capacity to react was also thrown off-kilter by the Ghosn turmoil, with industrial projects planned with Nissan placed on the back burner.

In its latest management revamp, Renault ousted Ghosn protege Thierry Bollore as chief executive and appointed financial chief Clotilde Delbos in the interim, billing the changes as a reset for the alliance. Nissan also has new faces at the helm.

Ms Delbos said on Thursday that the two groups would now be able to focus on ways to cut costs after the shake-up, though the worsening backdrop for carmakers adds urgency for the alliance.

Analysts at Evercore said in a note: "Needless to say that this profit warning comes at a time of major instability at Renault and its partner Nissan."

Carmakers also face billions of euros in fines if they fail to comply with European Union emissions targets by 2021. According to industry sources, many are thinking of further tie-ups with rivals to face these challenges.

Renault has said in recent weeks that a failed deal with Fiat Chrysler, which withdrew a merger offer in June, was not at present on the agenda. Ms Delbos said on Thursday that the logic of such a transaction was "as attractive" as before.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 19, 2019, with the headline 'Renault shares slump as profit warning adds to its woes'. Print Edition | Subscribe