Car maker Renault reports 30% jump in full-year earnings

Renault reported 2014 earnings that jumped 30 per cent, beating analysts’ predictions, as lower labour costs in France and higher sales of budget Dacia models helped offset tumbling demand in Russia and Latin America.

Operating profit rose to €1.61 billion from €1.24 billion a year earlier.

Revenue gained just 0.3 per cent to €41.1 billion.

Renault relied on demand for inexpensive models in Europe last year to sustain deliveries as a sales push outside the region fell flat because of economic woes in Russia, Brazil and Argentina.

The company, which owns 43 per cent of Japanese carmaker Nissan, is sticking to a strategy of expanding in emerging markets, with plans to introduce an ultra- low-cost vehicle in India this year and preparations to start building cars in China in 2016.

In 2015, Europe’s third-largest carmaker targets a higher operating margin after its return on sales widened to 3.9 per cent last year from 3 per cent in 2013. Renault also forecast higher deliveries and revenue this year with European and global car demand projected to rise by 2 per cent.

This year “should allow us to take a new step forward, thanks to an unprecedented product offensive,” chief executive Carlos Ghosn said in a statement.

To underpin its growth, Renault plans to hire 1,000 people in France this year. The manufacturer reached a deal with unions in 2013 that allowed it to cut about 7,500 jobs and freeze wages through 2016. That’s helping boost profit. The company targets a return on sales exceeding 5 per cent by 2016.

At the next shareholder meeting, Renault plans to recommend increasing its annual dividend to €1.90 per share from €1.72 the previous year.

The French company’s 2014 deliveries rose 3.2 per cent last year to €2.71 million vehicles, with sales of no-frills cars, including the Europe-focused Dacia brand, jumping 5.3 per cent to €1.14 million.

Renault’s third- largest market, may continue to hamper the French company’s growth strategy beyond Europe. The carmaker and Nissan jointly own a majority stake in OAO AvtoVAZ, the biggest carmaker in Russia, where demand is forecast to fall by more than 25 per cent this year.

Renault will be somewhat insulated from the turmoil in the market by holding off on plans to consolidate AvtoVAZ.

Chief executive Dominique Thormann said that the Russia unit “will probably not” be added to the books this year. The maker of Lada cars burdened Renault’s income by €182 million last year. Still, the French company doesn’t expect to take further impairment charges related to AvtoVAZ this year.

Bloomberg