Renault-Nissan ready to merge if France exits stake, says CEO

PARIS: Renault and alliance partner Nissan are ready to pursue a closer tie-up, Chief Executive Carlos Ghosn said on Friday, but not before the French state sells its stake in the French carmaker.
Ghosn, who heads both manufacturers, said a 2015 stand-off over French government voting rights had persuaded Nissan that no further consolidation was possible while France remains a shareholder.
“The Japanese will never accept to be part of an entity where the French state will be a shareholder of Japanese assets,” Ghosn told analysts as he presented Renault’s full-year results. “The day the French state decides to get out, everything is open.”
France is Renault’s biggest shareholder, with a 19.74 per cent stake and a bigger share of voting rights.
Renault posted record full-year sales and profits on Friday and set itself ambitious new mid-term goals for both after earnings were boosted by a comprehensive revamp of its product range.
Operating profit jumped 38 per cent to 3.282 billion euros in 2016 on 51.2 billion euros in revenue, up 13.1 per cent, Renault said.
That lifted its operating profit margin to 6.4 per cent from 5.2 per cent — meeting existing targets a year early.
The results were achieved “in spite of the fact that some of our important markets are still significantly lower,” Chief Financial Officer Clotilde Delbos said. “That means there is plenty of potential for Renault to continue to grow.”
Renault increased its market share in all regions last year, according to sales data published in January, thanks to a recent rush of product launches and the success of low-cost models such as the Duster and Kwid SUVs.
The group set new five-year goals including a 7 per cent operating margin and 70 billion euros in revenue — a further 37 per cent increase on last year’s level — to be measured in 2022. It raised its proposed dividend to 3.15 euros per share from the 2.40 paid out last year.
The full-year results largely beat market expectations of 3.07 billion euros in operating profit on revenue of 50.84 billion, according to the median of estimates given in an Inquiry Financial poll of nine analysts for Reuters.
However, savings in variable production costs amounted to 184 million euros for 2016, short of a 350 million target. The group had warned in July that higher research and development spending could imperil that goal.
The effect of pricing and mix — reflecting customers’ choice of vehicles and options — turned negative in the second half, paring 20 million euros from profits after a 135 million positive first-half contribution.
These setbacks “will likely temper the upper end of consensus upgrades”, Exane BNP analyst Dominic O’Brien said in a note. “The key here though will be the mid-term plan, (which) will likely re-ignite interest in the stock.”
The embattled Brazilian and Russian auto markets should bottom out at “stable” levels this year, Renault said, while China expands a further 5 per cent and India grows 8 per cent.
For 2017, the group pledged further growth in revenue and operating profit underpinned by positive automotive free cash flow. — Reuters

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