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Renault Outperforms Peugeot on Expansion Outside Europe

An employee works on badged panel sections for Kangoo automobiles at the assembly line at the Renault SA factory in Maubeuge, France. Photographer: Fabrice Dimier/Bloomberg
An employee works on badged panel sections for Kangoo automobiles at the assembly line at the Renault SA factory in Maubeuge, France. Photographer: Fabrice Dimier/Bloomberg

Feb. 16 (Bloomberg) -- Renault SA, France’s second-biggest carmaker, reported earnings and cash flow for 2011 that outperformed larger competitor PSA Peugeot Citroen on sales growth in Brazil and Russia.

Renault’s earnings before interest, taxes and one-time items fell 0.7 percent last year, the carmaker said in a statement today. That was less than the 27 percent operating profit drop posted by Peugeot. Free cash flow from Renault’s car-manufacturing unit was 1.08 billion euros ($1.4 billion) versus negative cash flow of 1.65 billion euros at Peugeot.

The French carmakers have strategies of boosting sales outside Europe as they predict the region’s vehicle market will contract a fifth consecutive year in 2012. Non-European deliveries accounted for a little more than 40 percent of last year’s vehicle sales at both manufacturers, while those markets generated 38 percent of revenue for Renault compared with 27 percent for Paris-based Peugeot.

“The big success in the Renault strategy and model range is reflected in the strong revenue increase in relation to the volume increase,” said Albrecht Denninghoff, a Frankfurt-based Silvia Quandt Research analyst with “neutral” recommendations on both carmakers. “At Peugeot, the weighting between Europe and the rest of the world is different, so they were unable to outweigh the pricing pressure inside Europe with price increases elsewhere.”

Stock Rises

Renault rose as much as 4.8 percent to 37.94 euros and was trading up 3.2 percent at 12:09 p.m. in Paris. The stock has gained 39 percent this year, valuing the carmaker, based in the Paris suburb of Boulogne-Billancourt, at 11 billion euros. Peugeot fell as much as 4.9 percent to 13.37 euros and was down 4.1 percent.

Earnings before interest, taxes and one-time items fell to 1.09 billion euros from 1.1 billion euros a year earlier, Renault said. Revenue rose 9.4 percent to 42.6 billion euros. Deliveries increased 3.6 percent to a record 2.72 million cars and light trucks, led by a 19 percent jump in countries outside Europe, with the proportion of deliveries from those markets increasing to 43 percent from 37 percent in 2010.

Renault and Peugeot, which ranks second to Volkwagen AG in the European car industry, both staged production stoppages late last year to reduce inventory. Renault forecast today that the region’s car market will contract 3 percent to 4 percent in 2012, marking the fifth consecutive annual decline.

Excess Capacity

Excess capacity in Europe’s car industry is probably about 20 percent, based on two shifts five days a week, Chief Executive Officer Carlos Ghosn said today at a press conference at Renault headquarters. Peugeot CEO Philippe Varin yesterday estimated overcapacity exceeds 20 percent.

Renault said it plans to pay a dividend of 1.16 euros per share. Ghosn said today at an analysts’ conference that, depending on how European car markets perform, “you can start seeing a dividend being paid from the core operation of Renault” for 2012 or 2013.

The payout plans are “good news” especially “in contrast to Peugeot, where there’s unlikely to be any dividend,” said Sascha Gommel, a Frankfurt-based Commerzbank analyst with a “hold” recommendation on Renault stock.

Peugeot said yesterday that it will sell property and a stake in its Gefco trucking unit in a 1.5 billion-euro asset-disposal program after net debt widened to 3.4 billion euros at the end of 2011 from 1.6 billion euros on June 30.

Brazil Sales

Renault’s sales in Brazil, which overtook Germany last year to become the manufacturer’s second-biggest national market, jumped 21 percent in 2011, pushing the company’s market share up 0.9 percentage point to 5.7 percent. Sales in Russia surged 60 percent, making the country Renault’s fourth-biggest market compared with the ninth-biggest in 2010.

The French manufacturer is likely to reach a target market share in Brazil of 8 percent a year earlier than its 2016 goal, Ghosn said. Peugeot yesterday said the carmaker failed to meet a target of break-even in Latin America in 2011.

Renault’s automotive free cash flow last year exceeded its target of 500 million euros. The company said it’s planning to maintain positive free cash flow in 2012 for the carmaking unit. Industrial net debt, which excludes sales-financing operations, fell to 299 million euros as of Dec. 31 from 1.14 billion euros a year earlier.

The cash-flow figure is “particularly good news, especially in the context of Peugeot yesterday announcing a massive cash burn,” Gommel said.

To contact the reporter on this story: Alex Webb in Paris via

To contact the editor responsible for this story: Chad Thomas at

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