Renault warned that revenue may decline this year, scrapping a previous goal, after first-half profit was hit by weakening car demand and an earnings collapse at alliance partner Nissan in the wake of the Carlos Ghosn scandal.
Net income slumped by more than half to 970 million euros ($1.08 billion) in January-June as revenue fell 6.4% to 28.05 billion euros, the French carmaker said on Friday. Operating profit also dropped 13.6% to 1.654 billion euros.
"Given the degradation in demand, the group now expects 2019 revenues to be close to last year's," Renault predicted — abandoning an earlier pledge to increase revenue before currency effects.
A broad-based downturn has rattled the sector, prompting profit warnings and compounding challenges for Renault and Nissan as they struggle to turn the page on the Ghosn era. Their former alliance boss is now awaiting trial in Japan on financial misconduct he denies.
Thierry Bollore, CEO of Renault, told CNBC Friday that market conditions had been "very different" from the firm's initial expectations.
"Overall, it is a degradation," Bollore said, citing weakening demand across several key regions worldwide during the first half of the year.
"We are in line with our commitments in (the first half), in terms of volume, in terms of turnover, in terms of operating profit — all that is secure despite this difference in market conditions," Bollore said.
Renault's bottom line was hit by an 826 million-euro drop in earnings from its 43.4%-owned alliance partner. Nissan is cutting 12,500 jobs globally after an earnings collapse that it is keen to blame on Ghosn's leadership.
But, Renault's own performance — reflected by an operating margin that declined to 5.9% from 6.4% — contrasts less favorably with domestic rival PSA Group. The Peugeot maker defied the downturn with a record 8.7% profit margin unveiled on Wednesday.
When asked about the current state of the Renault-Nissan alliance, Bollore replied: "At the moment, they (Nissan) are suffering. And it happens, so we just need to help them to make sure that they are recovering as quickly as possible."
Shares of Renault were marginally lower during mid-morning deals.
Risks and opportunities
Renault blamed falling sales in France, as well as Turkey and Argentina, for a 7.7% revenue drop at its core automotive business — whose profit margin slid to 4% from 4.5%.
Operating free cash flow also suffered, coming in at a negative 716 million euros as investment jumped by 742 million euros to 2.91 billion euros. The company nonetheless reiterated pledges to deliver positive full-year cash flow and a margin close to 6 percent.
Global trade tensions, regulatory framework unpredictability and the prospect of a no-deal Brexit were identified as the biggest risks over the next six months.
Meanwhile, new product launches, pricing improvements and competitiveness action plans were picked out as opportunities that could help stimulate growth.
