Renault's sales revenues grow during Q3

Renault has announced a further uplift in its sales revenues during the third quarter of 2015. For the three months ending 30 September, sales revenues rose 9.4% year on year (y/y) to EUR9,336 million (USD10,217 million). This buoyant performance was underpinned by its key Automotive segment, which recorded a gain in revenues of 10.2% y/y to EUR8,802 million. The biggest driver of this growth was sales made to partners, which accounted for 5.2 points of this increase, or around EUR413 million. However, other benefits included a 2.3-point increase from an improved product mix, 2.3 points from pricing and 2.6 points to others. However, this was offset by a 2.2-point decline in currency exchange rates and a further 0.6-point decline in its geographical mix.

The automaker also noted an only 0.6-point gain coming from increased sales volumes. This is on the back of the automaker's global passenger car and light commercial vehicle (LCV) registrations having grown just 1.2% y/y during the quarter to 621,000 units. Although its performance in Europe was up for this timeframe by 6.5% y/y to 339,000 units, it has come under great pressure from markets that had contributed to its growth in the past. This includes its Americas market - predominantly made up of Brazil and Argentina - where it has fallen 5.3% y/y to 97,000 units. In Eurasia, which has Russia and Turkey as its focal points, registrations have slid by 1.2% y/y. It has also contracted in Africa–Middle East–India of 4.8% y/y to 72,000 units as well as an 11.2% y/y decline in Asia-Pacific to 27,000 units.

However, a less positive contribution for the group has come from its RCI Banque sales financing unit, where revenues have dipped by 2.2% y/y to EUR534 million. This decline was said to be due to the lower interest rates in Europe and the impact of currency translation. However, there was a 15.2% y/y increase in the number of new contracts generated to 348,000, with new financing generated amounting to EUR3.8 billion, a 21.9% y/y gain.

The results for the quarter have contributed to its overall performance in the year to date (YTD). Sales revenues for the nine months now stand at EUR31,533 million, an increase of 11.2% y/y, as its Automotive division recorded an increase of 11.8% y/y to EUR29,867 million while RCI Banque was up 2.4% y/y to EUR1,666 million.

Outlook and implications

As with the announcement of PSA Peugeot-Citroën's financial results at the beginning of the week (see France: 26 October 2015: PSA maintains sales revenue growth during Q3), we get little more than a snapshot of Renault's performance during the quarter. Nevertheless, what little can be seen at the moment shows that Europe is proving to be an important contributor to its market performance this quarter, as was indicated by other data released earlier this month (see World: 23 October 2015: Renault maintains slow global sales growth in September as market performance splits). It is helped in this regard by new, high-priced models such as the latest-generation Espace and new Kadjar crossover. These have gained orders of 18,905 and 37,301 by the end of September, and are both generating greater revenues than their predecessors or equivalent models in its range. Renault will be looking for this situation to recur when the replacement for the Laguna, the Talisman sedan (see France: 7 July 2015: Renault reveals new D-segment Talisman) and estate, begin reaching customers, as well as the fourth-generation Mégane (see Germany: 17 September 2015: Frankfurt Motor Show 2015: Renault reveals fourth-generation Mégane). Next year will also bring a new larger, seven-seat sport utility vehicle (SUV) based on Nissan's X-Trail which will give Renault a full suite of models in the popular mainstream crossover category, which can only help matters further.

While the situation is much less positive in its international markets, Renault has tried to emphasise the fact that it has made ground in some markets despite an overall decline in unit sales. This included market share improvements in Eurasia of 1.5 points as a result of a leap of sales in Turkey, as it sought to defend its margins in the exceptionally weak Russia market. In the Americas its market share is up 0.5 points as it made ground in the declining Brazilian market and took advantage of the recent gains in Argentina. Its share in Asia-Pacific and Africa-Middle East-India remained flat, although Africa-Middle East-India could see a significant reversal of fortunes as its upcoming Kwid has already generated 50,000 pre-orders, while Asia-Pacific should see some benefit from local production in China in the years to come, despite the weaker growth in the market.

The situation in its key developing markets is expected to remain volatile over the final quarter of the year, according to the company, which will leave Europe to continue taking up the slack. Nevertheless, the company has retained its guidance for the full year in which it intends to increase its registrations and revenues (at constant exchange rates), improve the operating margin of the group and that of the Automotive division, as well as generating a positive Automotive operational free cash flow.

It now remains to be seen whether a reported tussle between Renault, Nissan and the French government over the cross-shareholding that makes up the Alliance (see France - Japan: 29 October 2015: Nissan seeks changes to Alliance with Renault – report) develops into anything more serious. In an interview with Les Echos that has been reported by Dow Jones News, France's economy minister Emmanuel Macron has criticised what he sees as Renault-Nissan's chief executive officer (CEO) Carlos Ghosn's attempt to reshape the company's structure. He told the newspaper, "He is CEO, not shareholder... Inasmuch as I represent the shareholder, I am not supposed to interfere in the management of the company. When someone wants to take the job of someone else, it never has good results." However, in the same interview cited by Reuters, Macron reiterated that the government has no intention of holding onto the additional stake in Renault that it built up - taking its shareholding from 15% to 19.7% - in the long term. Asked about a possible sale in 2016, Macron was quoted as saying, "It is a possibility, it has not been decided". He went on to say, "When we will be in a situation to preserve our shareholder interest, we will do it. To return, as promised, to exactly the level we have before, namely 15.01 percent." However, on the question of the Alliance, he added that the French government wants a deepening of the relationship between the two automaker, stating, "We need to define the modalities of this rapprochement, and that needs to be spelled out. This is an industrial and strategic issue, the shareholder issue will come at the right time." Nevertheless, it is likely that Nissan will be reluctant if it means that the French government could have a say over the overall strategy of the business.