Renault seeks to boost operating margins and reinstate dividends

Renault aims to raise operating profit margins to 10 per cent by the end of the decade as the French carmaker sets out plans to reinstate dividends next year and spin out its electric vehicle unit through a stock market listing.

The targets on Tuesday include producing €2 billion of cash a year from next year, rising to €3 billion in 2026, and growing margins to 8 per cent by 2025, rising to 10 per cent by 2030.

The French group is looking to build on its turnaround plan after losses in 2019 and 2020 and to repair its strained relationship with Japanese partner Nissan, as it races to compete with rivals pushing into EVs. Its electric car unit, known as Ampere, will aim for a listing from the first half of 2023.

Alongside the new targets, Renault will also divide into “teams” that chief executive Luca de Meo said would help the business to “break down silos” and work faster.

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The measures will also help raise the quality of its debt from “junk” status to “investment grade”, which will pave the way for Renault to pay out up to 35 per cent of profits as dividends under the group’s first payout policy. The group halted payouts in 2020 during the coronavirus pandemic. Renault also wants employees to own 10 per cent of the company’s shares by the end of the decade.

Its transformation plan is expected to coincide with a change in the structure of Renault’s alliance with Nissan over the coming weeks, people close to the discussions have said.

The company is also separating out its internal combustion motor business, and on Tuesday signed a framework agreement to form a joint venture on engines and hybrid power trains with China’s Geely.

– Copyright The Financial Times Limited 2022