(Bloomberg) — Renault SA lifted its financial outlook for 2022 as the struggling French carmaker’s turnaround efforts take hold and the supply of semiconductors needed to make cars looks set to improve.
Renault forecast Friday an easing of the chip supply constraints that have been a major roadblock in keeping assembly lines moving. The company is expecting shortfalls to shave production by 300,000 vehicles this year compared with around 500,000 in 2021.
“Right now it’s still a pretty complicated situation, but we’re all betting on the fact that in the second half the situation will get back to normal,” Chief Executive Officer Luca de Meo said in an interview on Bloomberg TV. “It’s better than last year, but still not ideal.”
The lingering snarls, along with soaring costs of raw materials muted the company’s financial ambitions.
The automaker predicted an operating margin of at least 4% this year, according to an earnings statement. While the goal was an improvement from one set in 2021, it remains relatively cautious after the same measure came in at 3.6% last year.
Renault is seeking to turn around a business that has been lagging rivals Volkswagen AG and Stellantis NV due to a reliance on the European market and on Japanese partner Nissan Motor Co., which is also emerging from a difficult period. The manufacturer is counting on a series of new models including EVs such as the Megane E-Tech crossover.
“Electrification is an opportunity to strengthen the partnership with our Japanese colleagues,” de Meo said in the interview. Renault and Nissan have announced a plan to deepen their operational ties.
While Renault has set ambitious targets to raise EV sales and production in Europe in the coming years and wants to get back into China, the CEO said it doesn’t have the resources or products to export to the U.S.
“It’s not part of our plan,” he said.
As part of the shift to electric cars, the carmaker is weighing the possibility of bundling its combustion-engine technology, hybrid engines and transmissions based outside of France into a single entity.
Renault shares were trading about 2.3% higher at 2:02 p.m. in Paris.
Renault swung to net income of 888 million euros ($1 billion) last year from a record 8 billion-euro loss in 2020, according to the statement. That compares with an average analyst estimate of 110 million euros compiled by Bloomberg.
Nissan contributed 380 million euros to Renault’s bottom line after being responsible for much of the French carmaker’s record loss in 2020.
“We are achieving one of fastest turnarounds in the history of automotive industry,” de Meo told analysts during a presentation. “Renault is back. We are determined not to go back to the past.”
He pledged to drive cost reductions beyond the 2 billion euros already achieved and to push further into the popular SUV segment. The carmaker’s plan to improve margins and cut costs unveiled at the start of last year underwhelmed investors. The carmaker had targeted an operating margin of at least 5% by mid-decade compared with a 4.8% return in 2019.
New CFO
Separately, the company announced Friday that Chief Financial Officer Clotilde Delbos will step aside to helm Mobilize, Renault’s mobility, energy and data unit. Delbos, who took over as interim CEO during the fallout from the shock departure of long-time leader Carlos Ghosn, will be replaced by Thierry Pieton. Delbos will remain deputy CEO.
Renault sold 2.7 million vehicles worldwide last year, 4.5% less than in 2020. The company took a 4 billion-euro French state-backed loan to survive the worst of the pandemic and later sold its stake in Daimler for 1.14 billion euros to safeguard its credit ratings.
It plans to repay 2 billion euros this year, according to the statement, and reimburse the loan in full by the end of 2023 at the latest.
Automotive operational free cash flow was 1.3 billion euros, better than the negative 70 million euros in the first half. Renault is forecasting at least 1 billion euros this year.
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