Q3 2012 Renault SA Sales Conference Call (English)
Oct 25, 2012 AM CEST
RNO.PA - Renault SA
Q3 2012 Renault SA Sales Conference Call (English)
Oct 25, 2012 / 04:00PM GMT
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Corporate Participants
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* Thierry Huon
Renault SA - Director of IR
* Dominique Thormann
Renault SA - EVP and CFO
* Jerome Stoll
Renault SA - EVP Sales, Marketing and LCV
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Conference Call Participants
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* Philip Watkins
Citi - Analyst
* Gaetan Toulemonde
Deutsche Bank - Analyst
* Fraser Hill
BofA Merrill Lynch - Analyst
* Charles Winston
Redburn Partners - Analyst
* Kristina Church
Barclays - Analyst
* Rabih Freiha
Exane BNP Paribas - Analyst
* Laura Lembke
Morgan Stanley - Analyst
* Philippe Barrier
Societe Generale - Analyst
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Presentation
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Operator [1]
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Ladies and gentlemen, welcome to third quarter commercial results and Renault Group revenues conference call. I now hand over to Mr. Huon. Sir, please go ahead.
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Thierry Huon, Renault SA - Director of IR [2]
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Yes, good evening, everyone. Welcome to Renault's third quarter conference call, broadcast live and in replay on our website. Presentation file and press release for this call are all available on our website in the Finance section.
I would like to point out the disclaimer on slide two of this pack regarding the information contained within these documents, and, in particular, about forward-looking statements. I invite all participants to read this.
Today's call is scheduled to last 45 minutes. We have two speakers this evening, Jerome Stoll, EVP, Sales, Marketing and LCV, and Dominique Thormann, EVP and CFO. Their presentation will last about 20 minutes, and will be followed by a Q&A session. If we don't have the time to take everyone's question in the session, Alain Meyer or myself will be around to take your calls later.
Without further ado, I will pass the call over to Dominique for a few opening remarks. Dominique?
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Dominique Thormann, Renault SA - EVP and CFO [3]
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Thank you, Thierry. Good evening, everyone.
Before going into our third quarter presentation, I would like to make a few opening remarks regarding the Group and the current operating environment. We no longer expect to match last year's volume, given the current European situation. We confirm our free cash flow guidance for this year, but visibility remains very poor, especially in Europe.
With that in mind, our conference call this evening will be focused on our performance in the last quarter, so without ado, I will pass the call over to Jerome to take you through the details of our commercial results.
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [4]
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Thanks, Dominique, and good evening, everyone. My part of the presentation will focus on commercial performance in Q3 alone. In the annexes, you will find for your information the same slides on a year-to-date basis.
So, let me start on slide five with the TIV evolution by region. In Europe, the market was slower than expected in Q3, down 9.3% versus 2011. With the exception of the UK market, that grew by 6.9%, all other major markets were down, with the French market down 11.7%, Italy down 23.3%, Spain down 18.9%.
The LCV market is down 10.3% across Europe, with strongest decreases in south European markets, such as Italy, minus 29.7%, and Spain, minus 27.1%.
The Eurasia region has again seen the most dynamic markets this past quarter with an increase of 12%. The recent market evolution is very positive, plus 12.9%, trending towards 3 million units for the full year 2012.
Asia-Pacific is the fastest-growing region in volume, with a growth of 7.1% fueled by the Chinese market at 13%, and by the Japanese market at 14.5% after last year's tsunami recovery.
The Euromed-Africa region is the third most growing region, with a 9.8% increase. Northern Africa markets are in strong momentum, driven by Algeria at 59.7%, while Turkey is at 5.5%.
Americas is up 8.6% this quarter, with an increase driven by the Brazilian market rebound at plus 16.3%, while the Argentinean market is down 9.3%.
In conclusion, global TIV reached 19.3 million units in the third quarter with an increase of 5.5%, plus 1 million units. China and the North American markets represent more than 95% of the world growth and TIV growth this quarter.
If we turn to slide six, we can see the evolution of Renault Group sales for each region. In Q3 2012, the Group sales faced two different situations. Outside Europe, despite an 8.4% decline in Asia-Pacific, Renault sales grew by 7.7%, with a solid performance in the Americas, where we outperformed the market, in Eurasia, and Euromed-Africa.
In Europe, our sales were impacted by a weaker-than-expected market, the strong decline of the French market, and an unfavorable product life cycle. I will explore this later on in my presentation.
Overall, Group sales decreased by 5.8% in the third quarter.
On the next slide, number seven, you can see the evolution of our sales outside Europe for each Q3 quarter since 2007. As you can see, for the first time, more than 50% of our sales were done outside Europe, with a unit sales record of 229,000 units. This reflects the internationalization of the Group.
The ranking of our top 10 markets show six countries outside Europe, with Brazil and Russia well established as the second and third most important markets for the Group.
As you can see on the following slide, our growth outside Europe is backed by both Renault and Dacia brands, while in Europe, Dacia is still going through its smart-buy positioning that fits an economical crisis, and thanks to the expansion of the range, Dacia also increased its sales outside Europe. Globally, it grows by 14,000 units in Q3 versus 2011.
The Renault brand increased its sales by 35,000 units outside of Europe, thanks to the entry range, as well as Thalia and Clio on the B segment and Fluence on C segment.
In Europe it lost 65,000 units. I will get into that later.
The RSM brand lost 21,000 in Korea, but our revival plan is underway.
Now, let's focus on the results of each region. Let's start on page nine with the Europe region.
Our sales performance in Europe was down in Q3. Group unit sales fell 18.4% and market share decreased 0.9 points to reach 8.5%. In France, our market share decreased 2.4 points at 24.5%. I would like to remind you that last year's performance in Q3 was fueled by the last portfolio we had built during the Tsunami crisis.
In Europe, the sales decrease equals to 60,000 units lost in the third quarter. As you can see in the chart on the top right hand side of the slide, this can be explained by two effects. First, a loss of 38,000 units due to the TIV evolution, especially with the weakness of the French, Italian, Spanish, German, and Dutch markets. And second, a loss of 22,000 units due to the performance, out of what more than one-third is due to our strategy in the UK. We changed to refocus our operation on more profitable products and sales channels.
The two other thirds are due to the low point in our product life cycle, especially before the Clio renewal. Our product range average age reached a high point in September, 5 years old, if we consider the top five European countries.
As you will see later in this presentation, and despite the tough retail markets in the last quarter, we globally increased our prices throughout our range and tried to maintain a virtuous sales policy by channel.
In the midst of this tough environment in Europe, there are, nonetheless, two positive items from my point of view. First, the Dacia brand. The Dacia brand is gaining 0.3 points market share at 1.7%. And second, our order portfolio. Our order portfolio stabilized its decline and it is now 1.2 months at the end of September, before the launch of Clio. This stabilization is a positive sign, even if it's too early to know if we have reached a low point.
If we take a look at our sales per channel on slide 10, we can see that despite the tough environment in Europe, we maintained a virtuous sales channel policy. This chart shows you the data for five different markets for which we were able to consolidate them -- France, Germany, Belgium-Lux, and Netherlands.
You can see that the retail channel has declined from 45% to 42% of the TIV. At the same time, OEM restrictions now represents 21% of the market in Q3 versus 18% only in Q3 2011. However, we have maintained a strict policy, both share on the OEM and short-term rental channel agreements low and are down compared to last year third quarter.
Now, let's turn to the Americas, slide 11. In the Americas, the Group registered a record 7% market, up 0.6 points from last year. As you can see on the top left side of the slide, our sales increased by 21,000 units versus last year. Three quarters of this increase is linked to performance, with sales outpacing the TIV, thanks to the success of Sandero and Duster.
In the rebounding Brazil market, our sales grew twice as fast as the market, plus 34.5%. Our market share is up 0.9 points to 6.7%. In the third quarter of 2012, Renault was the best performer in terms of market share gains in Brazil.
I would also like to highlight the performance in Argentina in the quarter, where unit sales grew by 12.9% in a decreasing market. Argentina confirms its top-five ranking of most important markets for the Group.
To keep it growing, we have decided expanding capacity in our currency-backed plan by 100,000 units, and keep on expanding our dealer network. By the end of the year, we will have 495 outlets versus 450 early 2012.
If we move to slide 12, in Eurasia the Group achieved a 5.3% market share, stable versus Q3 2011. Our sales increased by 12.4%, just in line with the market growth, as you can see on the top left side chart.
We were impacted by a supply shortage that negatively impacted our Russian sales. The Renault brand retained, nonetheless, its fourth position in the Russian market. Here again, we are expanding factory capacity through the de-bottlenecking, and we keep expanding our network. We plan to have 160 outlets by the end of the year, compared to 140 today, and 120 beginning of 2012.
In Euromed-Africa, slide 13, our sales increased by 4%. Our market share reached 13.9%, down 0.8 points. We were not able to follow the market increase, as you can see on the top left chart. This had mostly two reasons. In Turkey, we stopped the commercialization of the Thalia (inaudible) Euro 4, which was the market leader last year. In Morocco, we postponed the launch of Dokker and Megane phase two after the summer, in order to reach the appropriate quality ramp-up level, the level required from our customers, and we were not able to compensate the volume at this stage.
Nonetheless, one very positive point in the region is our market share gain in Algeria, plus 1.4 points. Renault is still leader of the market, while Dacia moved from sixth to fourth run in the quarter compared to Q3 2011.
In Asia-Pacific, next slide, our market share is slightly down, 0.1 points, at 0.8%, with a continued market share decrease of 4.6 points from Renault-Samsung models in South Korea. Our sales in the region are down 8.4%, and by 6,000 units compared to Q3 2011. This decline is due, among others, to our sales performance in South Korea that we are not able to compensate, despite escalating sales in India, and the very good start of Dacia.
To conclude on this international focus, and if you turn to slide 15, you can see that our international growth is backed by the systematic rollout of our entry platform in our strategic BRIC countries. For the first time, we have sold more than 200,000 Dusters this year. It is the third best-selling car of the entry range, representing 29% of this range volumes.
The blockbuster vehicle is the C-segment crossover leader in Brazil. In Russia, it's now our best-selling car, as well as the C-segment SUV leader. We launched the car in India early July, and so far we registered close to 24,000 orders.
Before leaving the floor to Dominique, I would like to emphasize the offensive of this coming quarter.
Four weeks ago, we revealed new Clio, new Clio at the Paris Motor Show. We are very pleased with the press, dealer, and public response to this vehicle, which embodies the new brand identity. Along with ZOE, it received the prize of the best looking car of the motor show, and for Clio IV, we already registered over 20,000 orders, and it has not yet been launched in Germany.
On the next slide, for new Logan and new Sandero, these vehicles, along Dokker, Dokker vans, and Lodgy, will contribute to the success of the Dacia brand in Europe and Euromed regions, and to our international expansion.
Beyond these (inaudible) models, our offensive outside Europe will be backed by more products developed specifically for international markets -- the Scala, just launched in India based on the Z platform of Nissan; Novo Clio in the Americas, which gives the new brand identity of the Group; Fluence, phase 2, which will be revealed next month.
In 2013, we will continue the renewal of the range with the launch of the crossover in the B segment and the implementation of the new brand identity (inaudible).
To sum up this presentation, I would say that first, Europe market and sales were weaker than expected; second, international regions are still pulling our sales; and third, we rely on the launch of our new products to reverse the negative trend -- Clio, Sandero, Logan, and Dokker.
And I'll pass the floor over to Dominique for the financial presentation.
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Dominique Thormann, Renault SA - EVP and CFO [5]
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Thank you, Jerome.
Let me start the financial part of this presentation today with slide 21, and the review of third quarter revenues. Group revenues decreased by 13.3% to EUR8.450 billion. In the third quarter 2012, the contribution from the Automotive Division decreased significant, by 14.4%, while the contribution of Sales Financing increased by 6.8%.
I will start the analysis with a review of the Automotive Division on slide 22. On this slide we show the contribution to the change in automotive revenues for the third quarter, broken down by item, which total 14.4%.
From the left hand side of the page, the first item is foreign exchange, which had a neutral impact in the third quarter. This comes from a basket of currencies where the weakness of some of them, like the Brazilian real, the Iranian rial, were offset by the strength of some other currencies, such as the British pound, the Korean won, and the Turkish lira.
The second item, volume, shows a negative impact of 15.6%. Earlier in the presentation, Jerome showed you that global registrations decreased by 5.8% in the quarter, but wholesale invoices decreased by 20.4%. This gap came mainly from the inventory adjustments at independent dealers, as I will show you in detail in a few minutes.
Next, geographical mix accounts for a minus 0.7 points, as invoices decrease in Europe where the revenue per unit is usually higher than the Group's average. However, thanks to Duster's success outside Europe, this gap is narrowing.
Model and version effect was positive in quarter three at 2.6 points, and sequentially improved compared to Q1 and Q2. Beyond the mix improvement in Europe, due to an easy comparison base in 2011, post the tsunami crisis, the positive impact was also largely supported by Duster's success in the Americas.
The price effect is positive for 0.5 points. We have managed to keep pricing erosion in Europe under control with no sequential deterioration versus H1, despite a worsening environment. Outside of Europe, we booked a positive price effect. This achievement is the result of our disciplined pricing policy, despite an aging lineup.
Sales to partners, representing mainly the sales of parts, components and built-ups to other brands, contributed negatively at minus 1 point, in line with total industry.
The last item, others, represents the other activities outside of the new car activity, mainly spare parts, as well as non-new-car activities of our wholly-owned dealers, namely Renault Retail Group, as well as restatements related to buyback commitments. It shows a neutral impact.
Moving to slide 23, you can see on this chart that, as planned, we managed to restore the balance between inventories on Renault's balance sheet, at 228,000 units, and at independent dealers, with 193,000 units. All told, inventories stood at 421,000 units versus 459,000 units at the end of June 2012, and 446,000 a year ago.
In number of days of sales on a backward-looking basis, we sat on 65 days of inventory at the end of Q3, as we did a year ago, which you can see at the bottom of this chart. For your information, on a forward-looking basis, we were 2 days below last year's level at 55 days. We still plan to be between 50 and 60 days at the end of the year on a backward-looking basis.
I will now move on to slide 24 with RCI Banque. The average loans outstanding were still above last year's level, up 6.3%, but the number of new contracts written in the quarter decreased by 2.3% versus Q3 2011. Globally, new financings were almost flat in the quarter, with a slight decline of 0.4%, indicating a higher loan per unit.
I would like to note that RCI Banque has demonstrated its ability to further diversify its sources of funding by issuing euro medium-term notes, denominated in Australian dollars, and Norwegian kroner in the quarter. RCI Banque also securitized an Italian loan portfolio for EUR300 million. Yesterday, we successfully announced the issuance of a securitization transaction backed by French auto loans for EUR700 million.
In line with our policy, we maintained a sound liquidity profile during the quarter.
Zesto, which is our retail deposit account, also proved to be a success, and we are confident that we will reach our new year-end target of EUR750 million of deposits, up from our previous target of EUR500 million.
Before moving on to the Q&A session, I will turn to the last slide on the outlook. As you know, we cut our TIV forecast for the European market this year from minus 6% to minus 7% in July to minus 8%, at best. This revision stemmed primarily from the deterioration of the French market that we foresee now at minus 13%, at best, versus minus 10% to minus 11% in July. As a reminder, at the beginning of the year, we were expecting a European market down 3% to 4%, with the decline of the French market 7% to 8%.
In this context, as we do not anticipate any improvement in the coming weeks for the European market, our sales volumes will fall short of last year's level, despite continuous positive development of our international business.
We maintain our free cash flow guidance for the Automotive Division for this year, but the European market remains a major source of concern.
Thank you for your attention. Jerome and I are now ready to answer your questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions). We have the first question from Philip Watkins, Citigroup. Sir, please go ahead.
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Philip Watkins, Citi - Analyst [2]
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Oh, good evening, and thanks for taking my question. Just on the free cash flow target, I mean, maybe I'm reading it wrong or sensing it wrong, but you are -- are you sounding a lot less confident about getting there now than you were a couple of weeks ago?
Secondly, just on the dividends that you receive from Nissan, do you remain committed to continuing to pass those on to your own shareholders?
And finally, I don't know if you're able to comment at all on the Peugeot financing situation, their getting a guarantee from the French State and how you feel about that, as a competitor of Peugeot? Thank you.
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Dominique Thormann, Renault SA - EVP and CFO [3]
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Okay. Three questions.
Yes, I mean, on the free cash flow guidance, clearly there's less of a safety margin than when we gave you the guidance initially. And, I mean, it's no mystery that every quarter has been somewhat more difficult in Europe. Now, once again, outside of Europe, things are actually developing rather positively. I think that Jerome's presentation attests to that The Duster launches around the world has gone well. We have, also, very strict discipline internally on cost and pricing. I think I mentioned that and showed it in one of the slides.
So, when you roll it all together, no, clearly, less of a safety margin, and, clearly, I did point out that the European market is a major source of concern going forward.
There is no change in our dividend policy. We -- it was established in last year and we did what we told you, which was to pass through dividends received and that was done earlier this year.
On the BPF state guarantee, I have no information other than what's been revealed publicly or what's been reported in the press. I think to your question about the fairness of the support, obviously we will pay close attention to the form that it will take and once we understand the precise details of the scheme, the interest -- our interest is that there wouldn't be any distortion of competition. I think that's all I can say at this point on that issue.
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Philip Watkins, Citi - Analyst [4]
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Thanks very much.
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Operator [5]
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We have a question from Mr. Gaetan Toulemonde, Deutsche Bank. Sir, please go ahead.
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Gaetan Toulemonde, Deutsche Bank - Analyst [6]
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Yes, good evening. It's Gaetan Toulemonde, Deutsche Bank, speaking. I have two questions, once for each.
The first one, if I understood well, Jerome, there is some quality with the ramp-up of Tangier which could explain why the volume so far is pretty limited. Can you update a little bit what's the situation and what could be the volume this year or next year from Tangier? That's my first question.
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [7]
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Yes, good evening, Gaetan. You know, the ramp-up of Tangier was of some concern because we wanted that, certainly, to reach the quality level that our customers expected. As you know, we have been working on quality for years now in order to secure the brand image more particularly.
Tangier is a new plant and, therefore, Dokker, the ramp-up, was a little bit lower than expected, but now things are going better and there is no -- I do not expect major impact from this ramp-up, and we should recover before the first -- I mean, the beginning of the next year.
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Gaetan Toulemonde, Deutsche Bank - Analyst [8]
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I will -- I think you gave us some numbers, you wanted to produce approximately 70,000 units this year and 170,000 next year. Is that still the ballpark of the magnitude of the ramp-up?
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [9]
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We should be a little bit lower for 2012.
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Gaetan Toulemonde, Deutsche Bank - Analyst [10]
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Okay, thank you. My second question is for Dominique. I'm a little bit lost with unit sales minus 6% and your volume minus 16%. Can you explain a little bit how we go from one number to another one?
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Dominique Thormann, Renault SA - EVP and CFO [11]
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Hi, Gaetan. It's stock, with the stock. If you look at the page that I showed you on the stock, you will see the rather significant destocking.
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Gaetan Toulemonde, Deutsche Bank - Analyst [12]
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Okay. Maybe I need to call afterwards. I'm a little bit lost there. Thank you.
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Dominique Thormann, Renault SA - EVP and CFO [13]
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Okay, but it's about -- I mean, it shows roughly 80,000 units in the -- at dealer level.
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Gaetan Toulemonde, Deutsche Bank - Analyst [14]
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Okay, thank you.
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Dominique Thormann, Renault SA - EVP and CFO [15]
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And that's in the quarter, right?
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Gaetan Toulemonde, Deutsche Bank - Analyst [16]
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Yes, yes, yes. Thank you.
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Operator [17]
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We have a question from Mr. Fraser Hill, Bank of America. Sir, please go ahead.
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Fraser Hill, BofA Merrill Lynch - Analyst [18]
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Yes, hi. Good afternoon. Two questions. Firstly, on the bridge and the breakdown, I mean, in terms of the free cash guidance, given that the revenue dynamic has been that much worse than you'd expected, is there anything specifically that has compensated more positively, below the revenue line that is allowing you to continue with the free cash flow guidance, perhaps the (inaudible) assets or perhaps your net pricing dynamic has been a little bit more favorable to offset?
And secondly, just back to that destocking that you saw by the dealers, are there any signs that that might have been a little bit overdone, and, potentially, you could get a tailwind from that effect in the fourth quarter?
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Dominique Thormann, Renault SA - EVP and CFO [19]
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Okay. Your first question on free cash flow, it's a mix of everything, below your line, yes, you're right, the volume effect is negative, as you see clearly on the chart, but, yes, I mean, everything else is, in terms of the other items that you mentioned, now there was a bit of a safety buffer in the number, in the guidance, and that's, obviously, one of the things that lower.
But if you look -- and, as you said, on the tailwind, because of the uncertainty and the high level of volatility, I'd rather say that we're -- we're going into Q4 with a lower level of stock, which is what we wanted to do, and as Q4 unwinds we'll see how much we can ramp up and feed into it. I'd rather be in the situation of chasing volume than having too much stock going into a down market.
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Fraser Hill, BofA Merrill Lynch - Analyst [20]
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Okay, thanks.
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Operator [21]
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We have a question from Mr. Charles Winston, Redburn Partners. Sir, please go ahead.
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Charles Winston, Redburn Partners - Analyst [22]
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Yes, hi, good evening. Two questions for me, as well.
I understand that this is a revenue call and, therefore, you're not in a position to talk about sort of added content in terms of the price impact, but in relation to your comments that sequentially there's been no deterioration in pricing, would that comment hold if one included the added cost of content, as well? That would be my first question.
And the second just relates to the Renault-Samsung business. Would the fairly sharp declines in volumes you've seen there, have they knocked your restructuring and reorganization plans in that business off track? Or would you say we're still on track to sort of get to near breakeven by the end of 2013, or has that been postponed there? Thank you.
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Dominique Thormann, Renault SA - EVP and CFO [23]
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Yes, you're right, this is a revenue, top-line call. So, I'm not going to go into a bridge or a part of a an item of a COP walk and just leave it at the price impact at the top line for tonight, if you don't mind.
On RSM, I'll ask Jerome to pitch in. First of all, just the facts are that the plan was deployed, as we told you it would be. It was announced and it's now behind us, in terms of the redundancy plan, but, Jerome, maybe if you want to add a little bit of color on the --?
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [24]
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Yes, okay. RSM is -- maybe some of you know that I spent some time in Korea, so I'm a little bit more concerned with what happens, I would say.
So, I think that the plan is on track. The voluntary reduction plan has been successfully done. We have reduced by almost 15% the work force, and some -- now we are deeply running after the localization process that was a little bit lagging behind and maybe, or certainly, one of the reasons of the lack of competitiveness until now.
And second thing, which also very positive in order to run these activities more properly is the agreement with Nissan that will put the production of trucks in Pusan. It's 80,000 units of production, and, obviously, it will help to better cover the fixed costs of the Company, and help to be more competitive on the local market.
Another issue that we have to, maybe, work a little bit more is the efficiency of the network and we are currently working on this specific matter.
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Charles Winston, Redburn Partners - Analyst [25]
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Thank you very much.
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Operator [26]
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We have a question from Mrs. Kristina Church, Barclays. Please go ahead.
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [27]
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Sorry, just -- complete the question on price, because you were talking about that. As you know, we had a different way to follow the evolution of prices, and one of them was against the basket and, more specifically, against two major competitors, French competitors, which we were behind them.
So, the first one is Citroen, as you know. So, we wanted to close the gap with Citroen in terms of transaction price, and we have done it. And we are still pushing this strategy successfully.
The second one is Peugeot, and we are close to reach our objective, also, to close the gap with their price position in transaction price.
The second thing I wanted to say is when you look at the net revenue per unit, there is a very good sign, also, is to see that revenue per unit for cars sold outside Europe is now getting -- increasing, improving regularly and we are now close to European standards, which is quite good, because, as you know, we are selling one car out of two outside Europe, and this is a good impact for the future.
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Operator [28]
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Mrs. Church, please go ahead.
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Kristina Church, Barclays - Analyst [29]
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Hi, yes. It's Kristina Church from Barclays. Just a follow-up question on pricing. I understand that you've done a good job in the quarter in terms of pricing and EBIT bridge. I just wanted to explain -- if you could explain a little bit about the -- that your revenue per unit did fall in the quarter. Can that be explained more by the mix shift to the increase in entry-level vehicles, or is there something else within that?
And then my second question relates to the alliance with Nissan. A few weeks back, there was some press headlines relating to sort of looking at the -- at your corporate structure again and Renault's share rallied hard on the back of that. Can you just update us on what your thinking -- current strategy is regarding your corporate structure? I know in the past you've talked about unlocking value, of the sum of the parts, value was still negative. Could you update us there? Thank you.
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [30]
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Just on price, what I said just earlier is the net revenue per unit is increasing. It's increasing in Europe; it's increasing in Euromed. And increasing in America and not -- maybe the only region where it's not is Asia-Pacific, but for all the other regions, the price per unit -- I mean, the revenue unit, net revenue per unit, is increasing. So, it's quite positive and not negative.
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Dominique Thormann, Renault SA - EVP and CFO [31]
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Kristina, on the alliance and the corporate structure, I don't have anything more to report than at the Investor Day. The -- directionally, I think it's been quite obvious that there -- we're working more with Nissan, and, as time goes on, clearly, this is an acceleration in synergies. There are more things that we're doing together. There are more countries; there's more scope for us to do things together.
So, the direction is more alliance, rather than less, but beyond that, I mean, the -- I don't have anything further to add at this point, and, if and when, obviously, we'll be talking to you, but that's not something that we have on the agenda right now.
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Kristina Church, Barclays - Analyst [32]
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Okay, thank you.
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Operator [33]
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We have a question from Mr. Rabih Freiha, Exane. Sir, please go ahead.
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Rabih Freiha, Exane BNP Paribas - Analyst [34]
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Yes, hello. Rabih Freiha from Exane. Thank you for taking my questions. I have two of them left.
First of all, during an Investor Day on the Clio last month, we -- since then, we've, obviously seen some deterioration in the environment. Yesterday, your main competitor talked about a step-up in pricing pressure in Europe. You confirm that deterioration, and to what extent can you still sit on the sideline and not get dragged into this?
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Dominique Thormann, Renault SA - EVP and CFO [35]
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The question is on Clio, specifically, or in general?
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Rabih Freiha, Exane BNP Paribas - Analyst [36]
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No, no, in general, in Europe on the pricing. Okay, then that's Jerome's question.
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [37]
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Thank you, Dominique. No doubt, then, the pressure is still on prices, so we are -- But this is the reason why we are looking at the price against the basket and to be, I would say, better than the others in this very tough competition is what we -- it's our ambition, I would say.
But just a few words on Clio, because you mentioned Clio. I think it's worth to say that the launch of the Clio is doing very well, and actually we have been able, obviously, (inaudible) you know this business very well, but you have been able so far to really believe that this comes to a very, very reasonable level and because the design is outstanding all the press, the customers, and everybody who has been looking at the car considers this product very attractive, and maybe it's a way to say Renault is back with the design. And I expect that this will allow us to price this product better.
So far, for Clio, we have already taken 20,000 -- more than 20,000 orders. We are really on track and despite the market down, so it's a good (inaudible).
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Rabih Freiha, Exane BNP Paribas - Analyst [38]
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Great. Thank you for this. Maybe my second question, what is the -- we're today in November, what is your level of visibility for the end of the year?
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Dominique Thormann, Renault SA - EVP and CFO [39]
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On what item?
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Rabih Freiha, Exane BNP Paribas - Analyst [40]
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On your sales, on your numbers?
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Dominique Thormann, Renault SA - EVP and CFO [41]
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Sales numbers. Okay, back to Jerome.
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [42]
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So, okay, as you know, until now we are negative in terms of volume, and normally we should not be in a worse situation by the end of the year, I mean, low to mid digits and -- but we expect, in terms of market share, especially in Europe with the launch of Clio and the arrival of Dokker and Lodgy effect, we expect to recover in the last part of the year, market share.
October will be still difficult for France, but as from November and December, we expect a recovery.
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Rabih Freiha, Exane BNP Paribas - Analyst [43]
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Okay. And maybe my last one, to follow up on this, are you able today to say that reaching your free cash flow guidance is in the bag? And, if not, what element do you believe in Q4 could still pose a risk to this guidance? Thank you.
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Dominique Thormann, Renault SA - EVP and CFO [44]
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No. No, it's not in the bag. I mean, I think I was -- I wanted to be very clear about that. The main risk is the European market. The opportunities, I think we see them quite well, and we're feeding as much volume into our growth markets as possible, and Jerome showed you charts on the ramp-up in India, for example, on Duster and things like that. So, all of that is actually going well.
So, we're a little bit in a paradoxical situation where we have -- we're short of capacity and we're virtually sold out of product in many markets, and we're facing a European situation which is a huge headwind. And so you have to manage both in parallel. And we need to aggregate both of them to give you a little bit of visibility, and I understand it's difficult, but the risk is Europe. The rest of our business is, if anything, it would be more of an opportunity.
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Rabih Freiha, Exane BNP Paribas - Analyst [45]
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Thank you very much.
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Operator [46]
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We have a question from Mrs. Laura Lembke, Morgan Stanley. Madame, please go ahead.
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Laura Lembke, Morgan Stanley - Analyst [47]
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Good evening. I have a few questions left.
Just the first one, coming back to inventory, I mean, we've seen this big destocking effect at the dealer level, but at the same time, we've also seen a pretty big increase at the OEM side. I'm just wondering what is driving this. Is this just reflecting, I mean, the ramp-up in production of the Clio and then also the Dacia and the Sandero? Is there something else behind it? Is it maybe that you haven't really cut production, really, in your own factories, essentially?
The second one, and, I mean, I know this is a revenue call, but maybe you could comment a little bit on the free cash flow guidance. I mean, are you still assuming that your auto business can be profitable in H2, or will the free cash flow be main met, let's say, to very good working capital management?
And then the last question is actually on RCI Banque. It's another good performance here. Can you just share with us how credit loss rates have developed over the last three months?
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Dominique Thormann, Renault SA - EVP and CFO [48]
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Okay. Three questions. The stock -- there's a seasonal issue where because of the summer shutdown in Western European plants, typically what happens is that you build more inventory going into the summer shutdown period, so at the end of June and July there are more cars built, because the production is very, very low in August.
So, on a quarter, July, August, September, you basically have one month when you're not producing cars. So, you end up ramping back up and feeding the -- your dealer groups by the end of the summer. Conversely, dealers who are stocked going into the summer, basically, sell out of inventory and end up at the end of the quarter with less inventory.
So, that's a seasonal pattern that you will find. Now that we're growing internationally, it's going to be, perhaps, less of a phenomenon going forward. But net/net the net effect of all of that is when you -- is the top line in my graph, where you had a total on-ground stock at dealer level and at company level, which has declined by almost 40,000 units.
So, that's the stocks situation.
Now, on free cash flow and COP, just to remind you, our guidance this year has been on free cash flow since the beginning of the year the -- I think that the operating profit line, this is not -- I'm not going to give you guidance tonight on the operating profit line. The two, of course, are interrelated and are linked, but at this point, I'd rather refrain from giving you any guidance on free cash flow.
And the working capital effect, the -- a number of -- I mean, we're keeping a very strict control over working capital. It's, obviously, also part of the equation to hit free cash. I mean, you can't do one without the other. So, as we manage stock levels, that will, obviously, feed into the working capital requirements, and the operating profit is also part of what's driving free cash flow.
So, inter-related, but, yes, working capital is being tightly controlled, as well, and managed on a weekly and monthly basis.
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [49]
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Maybe the last questions before closing the call.
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Operator [50]
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We have the last question from Philippe Barrier, Societe Generale. Sir, please go ahead.
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Philippe Barrier, Societe Generale - Analyst [51]
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Yes, good evening. Philippe Barrier, Societe Generale. Just a question about getting the inventories. Actually, what is the target in terms of percentage of sales or in terms of number of days at the end of the year, just to clarify provision for stocks? Actually, do you think that destocking is completely over for the Group? And, actually, what could be the target, in terms of percentage of unit terms, as the end of December?
And second question is regarding the changeover for Dacia, a slowdown in Sandero. The new models coming in production in coming months. Do you think it may affect the market of the Group on the emerging markets, as the customer knows that the model will be replaced in the coming months?
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Dominique Thormann, Renault SA - EVP and CFO [52]
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Okay. So, let me take -- hi, Philippe. Let me take the -- your stock question.
What we publish is the stock at the end of the period compared to sales of the prior -- of the period in question. On that basis, and that's the series of numbers that I show at the bottom of my graph, and on that basis, what we try to do is to manage somewhere between 50 and 60 days.
Now, you don't manage in a rearward-looking -- your business on a rearward-looking basis. You have to manage to what the order intake is and what the sales request is on a forward-looking basis. So, what we try to do is plan our stock levels to what the sales plan is, and, on that basis, at the end of September, we're looking at 55 days of sales in the coming quarter, so in Q4.
Now, where we'll be at the end of Q4, I, obviously, don't know that today, and I -- what we try to do is manage the numerator. The denominator, then, is actual sales. And that number is where we try to land somewhere between 50 and 60. If we're below 50, you end up losing sales, and if you're above 60, then you lose in efficiency.
So, that's how we manage it, both forward and rearward on the disclosure basis.
Now, as far as your Dacia question, I'll give that one to Jerome.
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Jerome Stoll, Renault SA - EVP Sales, Marketing and LCV [53]
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On the Dacia question, the Dacia and Renault products, it's the normal life of car makers we have anticipated the impact of anything, but keep in mind that, especially in the (inaudible) markets, what is pulling our sales everywhere is the Duster and Duster is still doing very well. So -- and is not renewed.
Anything regarding the introduction of new models, or renewal of models has been taking into account already.
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Philippe Barrier, Societe Generale - Analyst [54]
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Thank you.
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Thierry Huon, Renault SA - Director of IR [55]
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Okay. Thank you, Jerome. I guess this is the end of the call. Alain and myself will remain available for answer the questions you may not have been able to raise this evening. Have a good evening. 'Bye-bye.
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Operator [56]
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Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.
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