Renault’s earnings jump 38% in 2016

Renault SA’s profit surged 38% in 2016 after the French carmaker gained market share in Europe with an expanded line-up of sport utility vehicles and upgraded models like the Megane hatchback.

Operating profit increased to €3.28 billion ($3.5 billion) from €2.38 billion a year earlier, the Boulogne-Billancourt-based company said in a statement. The figure exceeded the €3.05 billion average of 16 analyst estimates compiled by Bloomberg.

Revenue jumped 13% to €51.2 billion. “It is a very good year, and we reached the targets that we set for ourselves,” chief financial officer Clotilde Delbos told reporters yesterday. “We reached these good results, despite struggles in once-strong markets like Russia and Brazil.’’

After overtaking French rival PSA Group as Europe’s second-biggest carmaker last year after Volkswagen AG, Renault faces the challenge of maintaining momentum as growth in its home region slows.

That will put more emphasis on Renault’s efforts to reduce its reliance on Europe by returning to Iran and expanding in India and Africa.

To show that growth can continue, the company intends to present a plan in October to increase annual revenue 37% to €70 billion by 2022 and lift its operating margin to 7% of sales in five years from 6.4%.

“Renault is one of the most attractive earnings transformation stories in the European auto industry,’’ Thomas Besson, an analyst with Kepler Cheuvreux, said in a note.

“Renault’s 2017 earnings should grow further on full availability of new models and the early stage of an emerging markets’ recovery.”

The shares rose as much as 4.1%, the biggest jump since July 12, and were up 2.1% at €84.50 at 9.14 a.m. in Paris trading. The stock has climbed 18% in the past 12 months.

Last year, Renault widened its market share in Europe to 10.1% as it lured customers with SUVs like the Kadjar and Captur and refreshed the Megane as well as the Scenic minivan.

The French manufacturer expects sales of its namesake Renault brand and the budget Dacia nameplate to grow further this year.

Renault’s worldwide deliveries rose 13% in 2016, compared with 4.6% across the sector.

In 2017, Renault is targeting higher operating profit and revenue at constant exchange rates, excluding the impact of Russian carmaker AvtoVAZ, in which Renault owns a majority stake and which it is consolidating.

The company expects the global car market to grow 1.5% to 2%, paced by a 2% increase in Europe and France.

Renault’s alliance with Japanese automaker Nissan Motor Co came just short of surpassing General Motors Co and joining the ranks of the top-three automakers by global sales.

The automotive partnership, which combined delivered 9.96 million vehicles in 2016, was lifted by the addition of Nissan’s minority stake in Mitsubishi Motors Corp.

Nissan’s contribution to Renault amounted to €1.74 billion, while Ladamaker AvtoVAZ was a negative €89 million.

Moscow-based AvtoVAZ yesterday posted a 39% reduction in losses last year after pushing through efficiency improvements and cost-cutting measures.

AvtoVAZ, majority-owned by Renault and its alliance partner Nissan, said it incurred a net loss last year of 44.8 billion roubles ($761.75 million), including impairment and restructuring costs of 25 billion roubles.

That compares with a record loss of 73.9 billion roubles in the previous year.

Renault, which is the target of a probe by French prosecutors into allegations of emissions irregularities, hasn’t made any provisions for potential damages, Delbos said.

The company has repeatedly insisted that its vehicles comply with French and European Union rules and aren’t equipped with software to cheat on emissions.

Delbos said the company had no information about the content of the French investigation.