(Bloomberg) — Renault SA raised its forecast for return on sales even as the struggling French carmaker warned semiconductor shortages would continue to curb vehicle production in the coming months.
The automaker predicted an operating margin of at least 4% this year, according to a statement Friday. The goal remains relatively cautious after the same measure came in at 3.6% during 2021.
The muted target could stem from Renault’s forecast that chip constraints will remain a major roadblock that is expected to shave production by 300,000 vehicles this year compared with around 500,000 in 2021. The supply snarls will come mostly in the first half along with higher costs of raw materials, it said.
Renault, pledging to only offer EVs in Europe by the end of the decade as part of its main brand, 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.
As part of the shift to electric cars, the carmaker is weighing to bundle its combustion-engine technology, hybrid engines and transmissions based outside of France into a single entity, the company said.
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.
“Renault Group largely exceeded its 2021 financial targets despite the impact of semiconductor shortages and rising raw material prices,” Chief Executive Officer Luca de Meo said in the statement. “This reflects the sustained pace of the in-depth transformation of the group.”
De Meo’s turnaround plan 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.
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 make an early repayment of 1 billion euros of the loan this year on top of the 1 billion-euro mandatory annual reimbursement, according to the statement, adding that the loan will be fully reimbursed by the end of 2023 at the latest.
Automotive operational free cash flow was 1.3 billion, 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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