Renault seeks Clio and Logan boost to 2006 sales

PARIS - Renault says it expects unit sales to grow in 2006, after a slight rise in 2005, thanks to the recent launch of the small Clio III model and strong demand for the no-frills Logan car.

Renault would focus on the most profitable market segments of retail consumers and small and medium-sized firms, said Patrick Blain, executive vice president for marketing and sales, as it seeks to defend its thinned profit margins in the face of a spike in raw material costs.

The world's fourth-largest car group reported global sales of 2,531,506 cars and light commercial vehicles in 2005, an increase of 1.7 per cent. European sales fell 4.1 per cent.

Renault said that in Europe, group volumes should grow slightly on generally stable markets which it expected to be extremely competitive.

"In this context, the priority of the Renault group will remain profitability," it said in a statement.New chief executive, Carlos Ghosn, will unveil a three-year strategy on February 9 with the 2005 results.

In November, the group cut its 2005 operating margin forecast by 1 percentage point to "more than 3 per cent".

Renault shares were 0.8 per cent lower at 71.20 euros at 11.15pm NZT while the European sector index was up 0.08 per cent.

Renault trades at a multiple of enterprise value to expected 2006 earnings before interest, tax, depreciation and amortisation (EBITDA) of 10.5. This compares with 5.34 for local rival PSA Peugeot-Citroen, which is due to report unit sales on January 11.

Renault has a majority stake in South Korea's Renault Samsung Motors and a 44.4 per cent stake in Japan's Nissan. The latter makes up more than 80 per cent of the Renault market capitalisation of some 20.5 billion euros.

Importance of Nissan

"You should not forget the importance of Nissan for Renault at the moment, and that at a time that Nissan is also slowing down," said analyst Patrice Solaro at Kepler Equities.

"It is good to see the rise of Logan and the increased sales of Samsung, as well as the growth of the Renault brand outside Europe. But in Europe most models are down and it will be difficult for the company with no new model expected before the end of 2007," Solaro added.

The biggest markets for Renault Group were France, followed by Spain, the United Kingdom and Germany.

Renault said its Megane model remained the top-selling car in Western Europe, with 619,462 unit sales. It had a 4.3 per cent market stake in West Europe, ahead of the Volkswagen Golf with 3.9 per cent and the Ford Focus with 3.7 per cent.

Blain told a news conference that in 2006 the sales would be boosted by Clio III as well as of a restyling of Megane and new engines for Laguna.

But most of the sales growth will come from outside Europe and he said Renault now sold 72 per cent of its cars outside France, reducing its dependence on the home market.

Blain noted the Spanish market had started to turn down towards the end of 2005 while Britain, normally a very profitable market, had declined, as had Italy.

"In Britain there is a price war between the two US groups, Ford and Vauxhall, which has spoiled the market and made it less profitable," he said.

In the rest of Europe, Blain said the German carmakers had also adopted a more aggressive stance on the markets with a series of bargain offerings.

Sector analysts polled by Reuters in December said they expected Ghosn to slash costs by 1.0 billion euros in a plan that could lead to lay offs of up to 10 per cent, with plants in Valladolid and Sandouville most at risk.

Blain declined to comment on Ghosn's plans but the Brazilian-born chief executive, credited for the turnaround at Nissan, has indicated he wanted to make Renault less dependent on one model (Megane) and the European market.

- REUTERS