Renault Quarterly Sales Slip as Strong Euro Saps Delivery Gains

Apr 24, 2014 6:01 pm ET

April 25 (Bloomberg) -- Renault SA, Europe’s third-largest automaker, reported a 0.1 percent decline in first-quarter revenue as the euro’s gains on currency markets offset higher car deliveries.

Sales fell to 8.26 billion euros ($11.4 billion) from 8.27 billion euros a year earlier, the Boulogne-Billancourt, France- based company said in a statement yesterday. Deliveries climbed 5.1 percent to 636,239 vehicles as demand for Dacia cars such as the Sandero hatchback rose.

“The European market was better than anticipated in the quarter, and this is good news,” Chief Financial Officer Dominique Thormann said on a conference call. “The severe drop in demand in some key markets as well as adverse foreign- exchange movements” burdened business outside Europe.

Renault, which owns 43 percent of Japanese carmaker Nissan Motor Co., is pushing into emerging markets to reduce dependence on Europe, where demand is recovering from a two-decade low faster than expected. The company raised its forecast for industrywide sales in its home region this year to growth of 2 percent to 3 percent from 1 percent previously, even as it predicted Russian and Brazilian markets will decline.

Renault’s expansion abroad left it exposed to the appreciation of the euro against currencies including the Brazilian real, Russian ruble and Argentine peso. Renault said that foreign-exchange fluctuations burdened automotive revenue by 409 million euros in the first quarter.

Major Headwind

“Foreign exchange has been a major headwind but fully in line with my assumptions,” said Sascha Gommel, an analyst with Commerzbank in Frankfurt. “Pricing was a bit better, which might indicate an improvement in Europe.”

Even with the setback in the first quarter, the maker of the Clio hatchback stuck to a target of increasing operating profit and generating positive automotive free cash flow in 2014. The French manufacturer is also aiming for an increase in full-year auto deliveries and group revenue, excluding currency effects.

Demand for Dacia’s two best-selling cars in Europe, the revamped Duster sport-utility vehicle and the Sandero, fueled a 42 percent jump in the brand’s first-quarter sales in the region. The no-frills nameplate helped Renault’s European sales climb 19 percent in the period, more than double the industrywide gain of 8.1 percent as the market revives from a six-year slump.

Russian Decline

“There is a big recovery coming in Europe,” Chief Executive Officer Carlos Ghosn said in an interview on April 15 at the opening of a plant in Brazil, Renault’s second-largest market after France.

Renault’s first-quarter deliveries in Brazil surged 22 percent after it recovered from the closure of a local plant last year. In Russia, its third-biggest market, sales fell 3.7 percent. Renault and Nissan have made a big bet on the future of the country’s car market by taking control of OAO AvtoVAZ, the maker of Lada models and Russia’s largest auto producer.

Renault is also expanding in India, where it plans to double its market share, and in China, where it received approval in December to build its first plant in the country.