Renault looks to Brazil and Russia as demand drops again in Europe

Posted on 16 Feb 2012

The automotive group’s revenues for 2011 were up 9.4% on last year, rising from €38.9bn to €42.6bn due to increased sales momentum and an improved product mix.

The rise was mainly due to the company’s core automotive business, which contributed €40.6bn to the firm’s revenues, a 9.4% increase on 2010.

The group experienced strong international growth outside of Europe, which increased by 19%, led by growing demand for its vehicles in Brazil and Russia.

However, the favorable impact of sales volumes and the €500m reduction in costs as part of the monozukuri plan did not entirely offset negative factors. The firm was affected by a €509m rise in raw materials and a €199m unfavorable currency effect.

Additionally, the supply constraints stemming from the Japanese tsunami had an unfavorable impact to the tune of €200m on the operating margin of automotive in 2011. The impact was mainly felt in production, commercial offers and logistics.

Production stoppages took place at Renault in 2011 to reduce inventory as sales in the automotive sector fell in Europe. The company has predicted that the trend will continue with markets outside Europe continuing to grow, especially Brazil (5%) and Russia (8%), offsetting the 3% to 4% decline its expects in the European market during, marking the fifth consecutive annual decline.

Commenting on the results, chairman and CEO of Renault Carlos Ghosn said: “Renault coped with the different crises faced throughout the year, exceeding the free cash flow objective for 2011.”

Mr Ghosn added: “In 2012 we expect international sales to be well in excess of 43% of the total, while maintaining the Renault brand leadership in France, and No. 2 position in Europe.”