Business Essentials for Professionals


Renault Forecasts Profits For 2021 Despite Chip Crunch And Higher Raw Material Costs

Renault Forecasts Profits For 2021 Despite Chip Crunch And Higher Raw Material Costs
Even in the face of a global shortage in semiconductor chips and rising raw material costs curbed its car production, French carmaker Renault said it expected to be able to deliver profits for the full year of 2021.
The French company said its expected loss to production because of the chip shortage will be about 200,000 units for the entire of 2021 which was double the company’s previous estimate of a loss of production of about 100,000 units. 
A net profit for the first half of the year was posted by the company, compared to a huge loss for the same period a year ago, driven by an increase in car sales and a new business strategy focusing on profitability.
For the first half of the year, an operating profit margin of 2.8 per cent was reported by the company and said that its expects the margin to be "of the same order" for the full year.
These results "mark only the first step in our turnaround, which should accelerate with the arrival of the new vehicles in preparation," said the company’s Chief Executive Officer Luca de Meo in a statement.
In the first half of the year, the company almost returned to positive cash flow compared to a negative cash flow of nearly 6.4 billion euros in the same period a year ago. \
The carmaker's improved liquidity position "allows us to pursue our recovery with serenity", said Chief Finance Officer Clotilde Delbos.
A new and ambitious strategy for electric vehicle production was unveiled last month by Renault with is focused on making new and affordable electric versions of its iconic small cars from the past with the aim of rivalling Volkswagen in the EV segment – one of the fastest growing segments of the global auto industry.
 The revenue of the company rose by 18.7 per cent in the first half of the current year following the company reporting a decline in car sales for the past five consecutive quarters.
Following the troubled period, the company had now given the task of turning around the company to its new CEO De Meo, who is a former Volkswagen executive and who is credited to have revived the fortunes of the German automaker's Seat brand.
The turnaround plan for Renault devised by De Meo - which he calls a "Renaulution", comprises thousands of job cuts, trimming the model range of Renault and focusing on greater cooperation on production with the company’s alliance partners – Japan’s Nissan and Mitsubishi.
One million EVs globally a year will be made by the Renault-Nissan-Mitsubishi alliance by 2030, the French carmaker said last month, compared to 200,000 the three companies mad manufactured together in 2020.
A net profit of 354 million euros ($420.52 million) for the first six months of 2021 was reported by Renault on Friday compared to a huge loss of almost 7.3 billion euros for the same period last year – because of lengthy industry-wide production shutdowns due to the restrictions imposed to curb the spread of the Covid-19 pandemic. 

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc