Renault profit up but headlights on struggling Russian unit

12th February 2016, Comments 0 comments

Renault said Friday net profit for 2015 was up nearly 50 percent to 2.96 billion euros ($3.3 billion) despite a hit from its Russian subsidiary which Renault said it may recapitalise and take over to save it from collapse.

The French carmaker said it was in talks with the holding company of its Russian unit, Avtovaz, after it took a 620 million euro loss in Russia as the economy slowed drastically last year.

Renault said in a statement the talks would examine the feasibility of "a recapitalisation which could lead to the consolidation of the company by Renault".

Avtovaz warned in a separate statement that without assistance, market conditions "create a material uncertainty that gives rise to significant doubt about the group's ability to continue as a going concern".

Avtovaz, which makes Lada cars, said it would further "optimise the workforce" as part of its "anti-crisis plan" to improve finances in 2016, having already switched all of its employees and management to a four-day week in February last year.

The Russian car market slumped 35 percent in 2015 as international sanctions over Ukraine and the crash in oil prices took their toll.

Avtovaz, based on the Volga river in the city of Togliatti, has been majority-owned since 2013 by Renault and Renault's global partner Nissan and employs 44,000 people, not counting jobs it generates for its suppliers.

- 'Confidence' in Russia, Brazil -

Globally, the success of new models such as the new Captur and Kadjar SUVs allowed Renault to hit profitability targets two years early.

The company exceeded its 5.0 percent target for operational profitability -- the 5.1 percent it registered was a marked improvement on the 3.9 percent in 2014.

Turnover surged 10.4 percent to 45.3 billion euros, with net profits up 48.1 percent.

Chief executive Carlos Ghosn said 2015 had been "a good year".

"On the basis of these results, we can look forward to 2016 with a certain degree of confidence," he said.

Ghosn said he was confident the global car market would grow between 1.0 and 2.0 percent this year and said he was counting on Russia and Brazil -- another developing market that slumped in 2015 -- picking up.

Renault also opened its first factory in China this month, although it is playing catch-up there with Japanese behemoth Toyota and US giant General Motors.

"We remain convinced that these markets will grow in the future and we will be ready when that happens," Ghosn told a press conference.

Renault will take on 1,000 employees on full-time contracts in France in 2016 "to underpin the growth of the group and meet our ambitions", Ghosn said.

However, the results failed to cheer investors, with shares slipping 0.68 percent to 68.38 euros, having dropped as low as 66.79 euros earlier.

© 2016 AFP

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