Renault plans for contraction
RENAULT hunkered down to face a worsening European car market after using discounts to clear vehicle stocks, boost cash and cut debt to its lowest in 13 years by the end of 2011.
Europe’s car market, which accounted for 57 per cent of Renault’s 2011 deliveries, is expected to contract three to four per cent this year as austerity measures and economic uncertainty bite into consumer spending power, the company said.
Unveiling a 40 per cent drop in full-year earnings, the French carmaker pledged to maintain positive free cash flow in 2012 after more than doubling its target last year, in contrast with mounting debts and cash burn at larger domestic rival PSA Peugeot Citroen.
PSA Peugeot Citroen on Wednesday put its profitable Gefco logistics business up for sale after net debt ballooned 170 per cent to €3.36bn (£2.99bn). PSA also burned through €1.6bn of cash in 2011 as the auto division swung to a €92m full-year loss.
Renault’s core manufacturing business held up better, with operating income falling 17 per cent to €330m, or 0.8 per cent of sales – compared with a divisional operating margin of 1.1 per cent in 2010.
It stayed in the black despite a sales slump in Europe, where Renault car sales fell 8.1 per cent last year, outpacing the market’s 1.4 per cent decline.
Net debt fell for a third straight year to €299m, its lowest since 1998 and a €1.14bn improvement over the year that came mainly from operating cash flow.
Renault’s €10.8bn automotive free cash flow exceeded its €500m target last year as net income fell 39 per cent to €2.09bn. Group sales rose 9.4 per cent to €42.63bn in 2011.