Renault warns of tough year ahead after $8bn loss in 2020

Renault suffered a record €8bn loss in 2020 and has warned of a difficult year ahead because of sluggish demand and a global microchip shortage that has rocked the industry.

The carmaker and its alliance partner Nissan, which contributes to the French group’s income, were badly affected in the first half of last year as the pandemic hit demand across Europe.

The net loss was worse than the €7.8bn predicted by analysts, but performance improved from July onwards, with Renault describing 2020 as a “year of contrasts”. 

The operating margin was 3.5 per cent in the second half of the year and Renault generated positive automotive operational free cash flow, although the company still suffered a net loss of €660m.

Shares were down 5 per cent at €37.94 by mid-morning in Paris after the company withdrew financial guidance for this year, warning about the impact of lockdowns and the chip shortage.

Renault chief financial officer Clotilde Delbos said: “With Covid… every day, you open the newspaper and you don’t know if [car factories] will close or open.”

Luca de Meo, Renault’s chief executive, said more pain was expected, with estimates that the chip shortage, which has forced closures at some plants, could hit production this year by 100,000 vehicles. The group sold 2.9m cars last year, a drop of 20 per cent compared with 2019.

“It’s a continuous battle until, I think, the end of the year, but we believe the supply shortage will ease in the second half, but we just have to fight,” said De Meo, who took over last July. “It is very hard to say what will be the exact, precise impact.”

The prediction appears more pessimistic than rivals. Daimler said last month it expects the chip crisis to peak during the first quarter.

Renault has already said it will reduce factory capacity by a quarter, deepen cost cuts from €2bn to €3bn by 2025, including 15,000 job cuts, and overhaul its brands in a turnround plan aimed at reviving its fortunes. 

“The priority is profitability and cash generation, as announced during our strategic plan,” said de Meo.

De Meo will also scrap revenue and market share targets and focus only on operating margins, cash flow and return on investments, marking a clear break from the strategy of former Renault and Nissan boss Carlos Ghosn, who was arrested in late 2018.

Renault said on Friday that 60 per cent of the original €2bn savings plan had already been achieved, well ahead of targets. In 2020 the group’s revenues came in at €43.5bn, slightly behind estimates and down 22 per cent over the previous year.

Delbos said the group was “at ease” with its liquidity position, which stood at €16.4bn at the end of the year. The French state helped the carmaker weather the pandemic by guaranteeing €5bn of loans given by banks last year. 

Renault has had its ability to pay a dividend curbed by restrictions on payouts from its own bank, RCI, by European regulators looking to strengthen the system during the pandemic. However, the carmaker says it will make up for this when possible with a dividend of €1bn.

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