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S&P: Nissan's dividend cut makes it hard for Renault to restore credit metrics

S&P Global Ratings said May 21 Nissan Motor Co. Ltd.'s plan to reduce its fiscal 2019 dividend by 30% will make it more difficult for Renault SA to restore credit metrics corresponding to its current BBB rating over the next 18 months.

Nissan expects to pay ¥40 per share in dividends for fiscal 2019, down from a fiscal 2018 dividend of ¥57 per share.

Renault holds a 43.4% stake in the Japanese automaker. The ratings agency's adjusted EBITDA and free operating cash flow measures for Renault include dividends paid out by Nissan.

Ratings now projects the French carmaker's adjusted EBITDA margin to drop to between 7.0% and 7.5% in 2019. Previously, the agency was expecting adjusted EBITDA margin in the range of 9% to 10%. Renault's rating outlook is negative.

Renault also forecasts a negative impact of €56 million on its net income for the first quarter of 2019 after Nissan posted a 57.3% year-over-year drop in net profit during its fiscal 2018.

Renault's ability to restore its EBITDA margin in 2020 depends on new car launches in the second half of 2019, a cost optimization program and cost reductions from an increased proportion of cars made on shared platforms with alliance partners Nissan and Mitsubishi Motors Corp., S&P Global Ratings noted.

As of May 20, US$1 was equivalent to ¥109.97.