Renault Quarterly Sales Miss Estimates on Currency Shifts

Renault SA (RNO), France’s second-biggest carmaker, reported third-quarter revenue that missed analyst predictions as currency drops in South America and Russia more than offset global delivery gains and higher pricing in Europe.

Sales fell 3.2 percent to 8 billion euros ($11 billion) from a restated 8.26 billion euros a year earlier, the Boulogne-Billancourt, France-based company said yesterday in a statement. Revenue was less than the 8.5 billion-euro average of six analyst estimates compiled by Bloomberg. Nine-month revenue declined 1.5 percent to 28.4 billion euros.

“It’s mainly due to the currency effect, which is explained by the fact that Renault’s second- and third-biggest markets are Russia and Brazil,” said Florent Couvreur, a Paris-based analyst at CM-CIC.

Chief Executive Officer Carlos Ghosn has joined other carmaking executives in pushing deliveries in emerging economies, predicting “tremendous growth” in the entry-level segment that’s the focus of the Dacia brand. The strategy is intended to counter the effects of a sixth annual contraction in Europe’s car market that has industry sales at a two-decade low.

The shares dropped as much as 3 percent, or 4.4 percent, to 65.30 euros and were down 2.9 percent as of 9:16 a.m. in Paris trading. The stock has gained 63 percent this year, valuing the automaker at 19.6 billion euros.

Currency Shifts

Renault’s nine-month Russian car and light-truck sales rose 12 percent, counter to a local auto-market contraction of 7 percent. At the same time, the ruble fell 8.5 percent against the euro in the 12 months through September, according to data compiled by Bloomberg. The Argentinian peso dropped 23 percent, and the Brazilian real declined 14 percent.

Shifts in those currencies and the Indian rupee reduced automotive revenue by 5.7 percentage points in the quarter. That amounted to 439 million euros, Chief Financial Officer Dominique Thormann said yesterday on a conference call with journalists.

Vehicle pricing helped the division’s sales by 0.9 points, Renault said. A 3.1 percent increase in deliveries to 614,888 vehicles added 0.1 point, with growth held back by a reduction in independent dealer inventories that Renault didn’t specify.

Inventory levels, which are “a bit too high,” amounted to about 75 days of supply on Sept. 30, and Renault is working to reduce that to 70 days by the end of 2013, Thormann said.

Labor Agreement

Ghosn created two top-management positions in September, overseeing model development and sales, to run the manufacturer’s earnings revival. The strategy includes a deal reached in March with French unions to cut Renault’s workforce in the country by 17 percent and freeze wages for remaining employees in exchange for not closing plants for three years.

That program mirrors agreements that larger competitor PSA Peugeot Citroen (UG) has reached with labor leaders to return the Paris-based manufacturer to profit. An accord signed yesterday between Peugeot and unions representing more than 60 percent of workers will freeze wages in 2014 and reduce overtime pay in exchange for guarantees of investments and new model production.

Peugeot is also cutting its workforce by 17 percent, or 11,200 jobs, by 2015. Part of that reduction comes from closing a Paris-area factory, which is scheduled to build its last car today. Peugeot’s third-quarter revenue dropped 3.7 percent to 12.1 billion euros.

Targets Maintained

Renault reiterated full-year targets for its carmaking division to increase sales and earnings after worldwide third-quarter deliveries rose .

The carmaker “remains on track to meet its objectives for the year,” including “higher group registrations worldwide, positive automotive operating margin and positive operational free-cash flow,” Renault said yesterday.

Group sales in Europe jumped 22 percent last month, helped by demand for the new Captur compact crossover and Dacia’s revised Sandero hatchback and Logan sedan, as the region’s auto market gained the most in two years, according to industry figures. Captur sales have totaled 48,000 since the model’s introduction in March, Renault said.

To contact the reporter on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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