Renault profit hit by the Russian market image

Even if the French automaker beat its profit targets last year, the financial outcome has been seriously affected by the Russia’s AvtoVAZ results.

Renault released its full-year financial results and data shows the automaker returned a net income of 2.82 billion euros (3.2 billion dollars) in 2015, while the Group’s revenues came to 45.32 billion euros, up 10.4 percent from 2014. Operating margin rose to 5.1 percent of sales from 3.9 percent, while operating profit climbed 44.2 percent to 2.32 billion euros. Despite these strong results, Renault’s profit was hit by a 620-million-euro loss from its stake in Russia’s biggest automaker AvtoVAZ. The negative outcome from the Russian market proved to be worse than Renault’s initial expectations, as the auto market has contracted by 35 percent, while the annual average Ruble exchange rate decreased by 33 percent and interest rates significantly rose. AvtoVAZ warned it may not survive without help from shareholders after reporting a record loss of 74 billion rubles (930 million dollars) last year from 25 billion rubles in 2014. Revenue declined 8 percent to 176 billion rubles, falling below costs. The Renault group said it has entered into discussions with the other shareholders of the AvtoVAZ’s controlling holding company, ARA BV, with an intention to recapitalize the company, which could lead to consolidation in Renault’s accounts. Renault’s 43.4 percent stake in Nissan earned it 1.98 million euros last year from its Japanese partner, up from 1.56 million in 2014.

The Russian automotive market started the year on the same downfall trend, a decline that pushed the industry last year to the lowest level since the country’s previous recession in 2009. After a 46 percent plunge in December, January 2016 sales of new cars and light commercial vehicles in Russia decreased by a further 29.1 percent compared to the same period over a year earlier.
As for the 2016 outlook, the automaker foresees a growth of 1% to 2% for the global market. Europe is expected to increase by 2%, with a 2% increase also for France. At the international level, the Brazilian and Russian markets are expected to decline further, by 6% and 12% respectively. On the contrary, China (+4% to +5%) and India (+8%) should pursue their momentum, Renault said.

Via Automotive News