The French manufacturer published, Friday, February 14, its worst financial results in a decade, posting in particular a net loss group share of 141 million euros, very far from the 3.3 billion profits in 2018, and even further from its absolute profit record, set just two years ago, in 2017 (5.1 billion). At the opening of the Paris Stock Exchange on Friday morning, Renault shares lost more than 4%.
It is therefore necessary to go back to 2009, that of the great financial and automobile crisis, to find traces of a loss in the accounts of the diamond company. The depression was much more brutal, and the hole of more than 3 billion incommensurate with the results of the moment. Still, 2019 puts an end to a cycle that had been exceptional for Renault.
Finance has indeed reflected the real world for the French manufacturer, who entered a new era last year, the first without Carlos Ghosn, his almighty former boss, arrested in late 2018 for financial embezzlement in Japan, the country from which he escaped, at the end of 2019, to take refuge in Lebanon. Not only did this thunderbolt shake Renault’s alliance with its Japanese partners Nissan and Mitsubishi to its very foundations, but all these upheavals are taking place against the backdrop of a global economic downturn.
Operating margin shrinks
However, all is not hopeless in these results 2,019. Turnover is certainly down by 3.3%, to 55.5 billion euros, but this is nothing abnormal in a market international down almost 5%. The operating margin also fell, from 6.3% to 4.8%, but operations continue to generate profits of 2.1 billion. After a period of intense cash consumption in the first half of 2019, new money was again generated at the end of the year, with cash flow amounting to 153 million euros.
Outlook for 2020 is uncertain, and recovery may take time
All of this is roughly in line with the October 2019 earnings alert, which saw Interim CEO Clotilde Delbos downgrading ambitions for 2019. “The Renault Group achieves its revised objectives”, title of the press release of the day. In addition, a large part of the announced loss – 753 million euros – is attributable to the abandonment of a tax claim, and is therefore not structural.
However, the most massive and longest-lasting problem for Renault is the situation of its ally Nissan, even if the Frenchman, for his part, experienced some operational failures, in particular in the launch of the Clio V , crucial for the group’s business model. Nissan’s contribution in 2019 fell by 1.27 billion euros, to 242 million last year, due to the Japanese’s difficulties. On Thursday February 13, Nissan announced a steeper than expected drop in sales.
The “Nissan rent” is moving away
And the French manufacturer, a 43% shareholder of its Japanese ally, is not about to revisit anytime soon the “Nissan rent”, which had accompanied its good years. The Japanese partner has further revised its earnings prospects down. He announced that he will not be paying dividends for this fiscal year. And all this, without even taking into account the effects of the coronavirus on a company that received its rare good news from China.
Because this is where the shoe pinches. If 2019 results are poor, the outlook for 2020 is uncertain, and the turnaround may take time. In addition to the coronavirus and Nissan’s difficulties, Renault highlights the weight that European regulations on CO2, which came into force this year and a “Sharp increase in depreciation linked to investments to prepare for the future”. The summer of Renault’s new managing director, Luca de Meo, who will not take up his post until July, promises to be busy.
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