Q1 2014 Renault SA Sales Conference Call

Apr 24, 2014 AM CEST
RNO.PA - Renault SA
Q1 2014 Renault SA Sales Conference Call
Apr 24, 2014 / 04:00PM GMT 

==============================
Corporate Participants
==============================
   *  Thierry Huon
      Renault SA - Director of IR
   *  Dominique Thormann
      Renault SA - EVP, CFO
   *  Jerome Stoll
      Renault SA - EVP, Chief Performance Officer

==============================
Conference Call Participants
==============================
   *  Thomas Besson
      Kepler Cheuvreux - Analyst
   *  Rabih Freiha
      Exane BNP Paribas - Analyst
   *  Philip Watkins
      Citi - Analyst
   *  Laura Lembke
      Morgan Stanley - Analyst
   *  Kristina Church
      Barclays - Analyst
   *  Charles Winston
      Redburn Partners - Analyst

==============================
Presentation
------------------------------
Operator   [1]
------------------------------
 Ladies and gentlemen, welcome to the first quarter commercial results and Renault Group revenues conference call. I now hand over to Mr. Thierry Huon. Sir, please go ahead.

------------------------------
 Thierry Huon,  Renault SA - Director of IR   [2]
------------------------------
 Thank you. Welcome, everyone, to this Renault first quarter 2014 conference call, broadcast live and in replay versions on our website. The presentation file and press release for this calls are all available on our website in the Finance section.

 I would like to point out the disclaimer on slide 2 of this pack regarding the information contained within this document and, in particular, about forward-looking statements, and 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 and CPO, and Dominique Thormann, EVP and CFO.

 The 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 questions in this sessions, Alain Meyer and 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 Thormann,  Renault SA - EVP, CFO   [3]
------------------------------
 Thank you, Thierry, and good evening, everybody. Before reviewing Q1 commercial results with Jerome in a minute, I would like to highlight the key takeaways from the first quarter.

 Firstly, the European market was better than anticipated in the quarter, and this is good news. With hindsight, we had probably been a bit too cautious in our full-year assumption at the beginning of the year. Jerome will give you our latest revised forecast for the region in his presentation.

 Secondly, our business outside of Europe was negatively impacted by several factors, including the situation in Iran, the severe drop in demand in some key markets, as well as adverse foreign exchange rate movements.

 Thirdly, I would like to highlight that our products recently launched in Europe are doing well and that we will have important launches in the course of the year to support our momentum outside of Europe.

 To conclude these opening remarks, the first quarter revenues were impacted by a de-stocking effect resulting from the reduction in the level of independent dealer inventories. I will comment this in more detail later in my presentation.

 Given this overall context, we maintain our full-year 2014 guidance.

 I will now pass over the call to Jerome, who will review our commercial performance in the first quarter. Jerome?

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [4]
------------------------------
 Thank you, Dominique, and good evening, everyone. I will start my presentation on slide 6, with market trends and our registration for the first quarter compared to the same period last year, globally and for each region.

 The global TIV is up by 4.7%, driven by Europe and China.

 The European market is back to growth, with an 8.2% increase over the period. Each European countries is contributing, except the Netherlands and Switzerland. At the end of March, the French TIV is back in the black, at plus 2.1%.

 In the overseas regions, Asia-Pacific TIV is up 7.6%, driven by China and Japan. Eurasia, Euromed-Africa, and Americas are suffering falls of minus 2%, minus 10.8%, and minus 3.5%, respectively, mostly linked to the troubled financial or political situation in their key countries.

 In this context, Renault registrations are outperforming the market, with a 5.1% increase, and excluding Iran, the rise would have been even stronger, with a plus 7.5%.

 The results are balanced within the regions. The Group increased its volume in Europe and Americas. However, fewer registrations were made in the other regions.

 I will now detail these results within the next slides. As you can see on the slide 7, the Renault Group increases its sales by 31,000 units. The growth comes from Europe, where our sales go up by 54,000 units, mainly from UK, France, Italy, and Spain.

 With 274,000 registrations, our international operation lost 23,000 units. Asia-Pacific is heavily penalized by the situation in Iran. Eurasia and Euromed-Africa are suffering from the downturns in Russia, Algeria, and Turkey. Our own performance of plus 8.9% in the Americas offsets the uncertain economic situation in the region and leads to a gain of market share in Brazil and Argentina.

 If you turn to slide 8, you see that our international mix of sales is temporarily down, to 43%. This is a logical consequence of our great performance in Europe combined with the poor market conditions in our main emerging countries.

 I want to stress the balance we have reached in terms of risk management, thanks to a global strategy. Sometimes, the emerging countries are pulling our sales; sometimes, it's Europe. But in any case, we are improving our global performance.

 I want to highlight two points from the chart representing the ranking of our top 10 countries, on the right side of the slide. Firstly, we are increasingly robust in our core markets. Compared to last year, we gained 0.6 points, to reach 9.8% of market share in our top 10 countries.

 And secondly, we are protecting our position in struggling key emerging markets. Our market share is up in Brazil and Argentina. It's almost flat in Russia, but prior to the renewal of Logan and Sandero. And only Algeria sees a likely temporary decrease in its performance due to a slow start in January and February. But our 2.8 points gain of market share in March makes us confident of a quick recovery in the key countries for the Group.

 Now, let's detail our performance in each region. Let's begin, slide 9, with Europe, which is growing for the third quarter in a row. Our market share is up by 0.8 points, to reach 9.7%. This is 54,000 units more than in Q1 2013 -- 17,000 units are linked to the TIV and market mix, and 37,000 units are the results of our good sales performance.

 The Group is gaining market share in almost every country. The Renault brand is the leader in the B segment, with the success of Clio and Captur, and continues as number one in LCVs and with the renewal of Trafic coming soon. Dacia gets its highest market share ever, with a 2.5% of the European TIV.

 Sales momentum should remain positive, as our order book is worth more than 50 days of sales, back to the pre-crisis level.

 The slide 10 shows our year-to-date market share per sales channel for the five countries for which data is available. I want to stress that our commercial performance is achieved in compliance with our rigorous better-business approach. The Group remains steady on retail and fleet channels, while reducing its exposure to the short-term rental channel by 1.6 points. And compared to last year, the weight of fleet channel in the total TIV is stable.

 In the Americas, slide 11, our market share is up 0.8 points, at 6.7%, representing 9,000 units more than in Q1 2013. The market conditions make us drop 5,000 units, but our commercial performance largely exceeds this loss, with 14,000 additional units.

 In Brazil, market share is up 1.3 points, at 6.7%. This is a good performance, even if the 2013 reference is low due to the Curitiba plant closure at the beginning of last year. Sandero remains the best-selling Renault car, ranked in the top 10, and the best is yet to come, with its renewal in the course of the year.

 In Argentina, in a difficult context, Renault increases its market share by 0.9 points, and even claimed the first rank in March.

 It is worth noting that these positions have not been achieved at the expense of pricing. In these two countries, for example, we increased prices more than the market average to protect our profitability.

 In Eurasia, slide 12, and despite an unfavorable TIVs, minus 2%, our registrations are almost even with last year. Renault's market share is slightly increasing, at 7.3%.

 In Russia, despite a market down 2.3%, despite Logan I and Sandero I getting near to the end of their life cycle, and despite price increases above market average, Renault's market share remains robust, at a high level of 7.7%. Duster keeps by far its position of best-selling SUV in the market and the fourth car overall, with more than 20,000 registrations.

 In the CIS -- Belarus, Kazakhstan, [and all the countries with -- stan] -- we almost doubled our market share, to 5.9%.

 In Euromed-Africa, slide 13, we lost 13,000 units this quarter. 15,000 were due to TIV, as we faced severe downturns in our two main markets -- Turkey, minus 24.5%; and Algeria, minus 28.3%. This sees us lost 0.6 points of market share in Q1.

 In this context, we are nevertheless strengthening our robust positions in Turkey, where our market share increases by 1.4 points, to 18.7%. Fluence, with the new iconic Renault brand identity, is the best-selling car in the country; new Symbol is ranked second; and Clio, sixth.

 After two difficult first months in Algeria, our market share is up 2.8 points in March. We are optimistic for the mid- and long-term potential. Algeria is a key country for Renault, with developing industrial activities and a lot of ambitions for the future. New Logan and new Symbol starts to deliver the expected performance, positioning themselves in the top five ranking.

 Let us switch to Asia-Pacific, slide 14. And once again, the situation in Iran is the main cause of our fall of 18,000 units compared to Q1 2013. The other 5,000 units lost are the consequence of a forecasted slow start in India, linked to our product life cycle. Therefore, our market share drops by 0.2 points, to 0.4%.

 The good news comes from Korea. The Renault Samsung Motors revival plan is fruitful. Our market share is up 0.3 points, to 4%. March was the 10th consecutive months of growth. The Captur-based QM3 is a huge success, elected SUV of the year in Korea. The first deliveries have been made in March. Renault Samsung Motors' goal is to reach this year the 5% market share milestone.

 Before wrapping up this chapter on the commercial performance, I would like to give you some perspectives for the rest of the year, on the slide 15. The European market should continue to lead the growth, with a 2% to 3% increase in 2014. Brazil and Russia should show a slight decrease. Uncertainties remain strong in Argentina, Algeria, and Turkey, and for these countries it would be difficult to [escape] for a double-digit decrease.

 In this context, we remain on track to achieve our 2014 commercial objectives -- first, keep gaining market share in Europe; and second, increase global volumes. Our main assets to succeed will be the performance of our new products -- Clio, Captur, [joined by] new Twingo and new Trafic; the relevance of Dacia, the fastest-growing brand in Europe in Q1; and the international roll-out of new Logan and new Sandero.

 Thank you for your attention. I hand over to Dominique, who will now review our first quarter revenues.

------------------------------
 Dominique Thormann,  Renault SA - EVP, CFO   [5]
------------------------------
 Thank you, Jerome. I will start this part of the presentation with the variance in first quarter revenues compared to last year, on slide 17. As you can see Group revenues were almost flat, at EUR8,257 million in the quarter, versus EUR8,265 million a year ago. Both the contributions of the automotive division and RCI were equally flat.

 I will start the analysis with a review of the automotive division, on slide 18. On this slide, we show the contribution to the change in automotive revenues for the first quarter broken down by item. Reading from the left-hand side of the slide, the first item is foreign exchange, which was highly negative, with a 5.3-point impact.

 The reasons this time around were quite numerous, with almost all currencies from emerging countries where we are doing business significantly weaker than a year ago compared to the euro. The Argentinian peso and the Russian ruble were the two main negative contributors.

 The second item is volume. Jerome just showed you that global registrations increased by 5.1% in the quarter, but due to the inventory reduction at independent dealers, wholesale invoices increased less than registrations.

 Next, the geographic mix accounts for a slight positive, as sales in Europe rose. However, the impact remained limited, as the price gap between Europe and outside Europe has almost disappeared.

 The model and version mix is a slight negative, as our sales mix has been driven by successful M0- and B-segment products, whereas C-segment products have entered the last phase of their life cycle.

 The price effect was positive, for 1.3 points. While this positive impact demonstrates our continuing efforts at maintaining our pricing discipline in the European market, it is mainly the reflection of price increases decided in certain countries outside Europe to mitigate currency weakness.

 Sales to partners contributed positively, for 3.1 points, and reflect the strong momentum of our core operation with Daimler and the alliance with Nissan.

 The last item, Others, represents the activities outside the new car business, mainly spare parts, non-new car sales, as well as restatements related to buyback commitments. It shows a positive contribution of 0.5 points, mainly related to the parts business.

 If you turn to slide 19, as I just explained, we have experienced a strong de-stocking effect at independent dealers, coming from 388,000 units to 272,000 units in the quarter. However, total Group inventories increased by 39,000 units and ended above last year's level, at 527,000.

 These inventories represented 76 days of sales at the end of March. As you know, we have a seasonal pattern which often brings this level at its peak of the year in March. That said, on a forward-looking basis, our inventory level remains in the mid-60s area, which is not far from the level I mentioned several times in the past as being appropriate.

 We are facing a contrasted situation between Europe and emerging markets. In Europe, we are comfortable with our current level of inventory, which is well balanced with demand and with our order book. Outside of Europe, the situation is a bit more complex, as demand slowed sharply in key markets.

 The additional inventories at the end of Q1 came mainly from South America. Part of the stock build-up relates to the disruption last year following the plant closure in Brazil.

 A second part of the stock build-up is explained by cars that were produced and ready to be shipped to Argentina from Brazil, but that were held back awaiting currency allowances from the government. Since currency allowances are decided with very short notice in Argentina, we needed to have the cars produced in order not to miss business opportunities.

 Going forward, we aim to curb our inventory level to ensure a proper balance with demand. As long as we feel the recovery potential in our key markets, our top priority will be to supply demand. Beyond Europe, we're expecting some recovery in certain emerging markets in the coming months.

 I will now move to slide 20, and comment RCI's commercial performance. The number of new contracts written by RCI Bank in the first quarter of 2014 increased by 9.8% versus the same period in 2013, thanks to the strong sales momentum of the Renault Group in Europe.

 New financings increased at a slower pace than the number of new contracts, at plus 6.7%, due to a negative foreign exchange impact, especially in the Americas.

 Average loans outstanding increased by 2.3% compared to the first quarter of 2013.

 Thanks to the success of our retail deposit activity in France and Germany, RCI Bank significantly reduced its issuance in the bond market, which tightened our spreads. In the first quarter, RCI Bank issued a EUR500 million bond with a seven-year maturity and a coupon of 2.25%. This bond was the longest maturity ever issued by RCI Bank, with the tightest spread since the financial crisis back in 2008.

 Before moving on to the Q&A session, I will turn to the last slide, number 21, which shows you our outlook for 2014. As I mentioned in my preliminary remarks, the market in Europe is improving. Conversely, uncertainties surrounding emerging markets are rising for both in terms of total industry demand as well as foreign exchange rates. Given this context, we maintain our guidance for the full year 2014.

 That concludes our presentation. Together with Jerome, we are ready to take your questions, and I will now hand the call back to the conference operator. Thank you very much for your attention.



==============================
Questions and Answers
------------------------------
Operator   [1]
------------------------------
 (Operator Instructions) Thomas Besson, Kepler Cheuvreux.

------------------------------
 Thomas Besson,  Kepler Cheuvreux - Analyst   [2]
------------------------------
 To start with, can I start with the level of inventories, please? Can you try and explain us where would be the ideal level of inventories? You talked about being very comfortable with Europe. How much real excess inventories you believe you have in emerging markets?

------------------------------
 Dominique Thormann,  Renault SA - EVP, CFO   [3]
------------------------------
 Thomas, this is Dominique. The issue, as I said in my remarks, is in South America, and it's primarily an intra-regional issue. First of all, the basis of comparison is skewed by the fact that, if you'll remember, we were -- the plant in Curitiba was closed last year at this time, or at least for part of the first quarter, which had completely run our stocks -- we had run out of inventory. And we had very, very low levels of on-ground inventory.

 The primary difficulty that we have today are intra-regional manufacturing and trade balances between Brazil and Argentina. Part of the Argentine market is supplied by Brazil, cars manufactured in Brazil. Conversely, part of what the Brazilian team sell in Brazil is sourced from Argentina.

 Both the export and the import side has been complicated by the currency controls that were imposed during the quarter. We are not at liberty to access the amount of foreign currencies that are needed to settle the imports unless the government, or the central bank, authorizes and releases funds to our affiliate. However, if we don't have the cars and we receive the money, it puts us in a position of losing business opportunities.

 So, vehicles were manufactured on the Brazilian side of the border and have been held, awaiting further release by the central bank of hard currency to settle them. And until we receive those currencies, those vehicles will be held in stock.

 On the European side, however --. Oh, and I should also point out that Algeria, which has a very, very long lead time, is also in a situation where it's going to take another few weeks to absorb the excess stock level.

 So, there is --. To your question about what the ideal level is, it's difficult to quantify that. We are really facing exceptional circumstances in Argentina and in Algeria, which didn't exist last year.

 However, the core markets, the European situation, is very well in balance and, here, we have a situation where for the first time our order book is increasing quarter over quarter and the sales pace is equally picking up as we're entering the spring selling season.

 So, the seasonality in Europe is always at a high point at the end of March. This is something that is expected, that was deliberately done, because the order book is rising fast.

 So, what's ideal in Europe is not ideal in South America, and conversely. It really depends on the market momentum in both cases. And in this quarter, we're exactly in the opposite situation of where we were last year in the first quarter, where the momentum was outside of Europe and the slowdown was still inside of Europe.

 So, if we look forward, our stock levels are well balanced globally. As I said, we'd be somewhere in the mid-60s, and we're comfortable both on the supply as well as on the sale side of the Company with those levels of stock.

------------------------------
 Thomas Besson,  Kepler Cheuvreux - Analyst   [4]
------------------------------
 Okay. Very clear. Another quick question, please. Can you comment, Dominique, on slide 18, on the impact of profitability of the last two green boxes -- sales to partners, and what you qualified as being mainly parts in the Others, in the last bit?

------------------------------
 Dominique Thormann,  Renault SA - EVP, CFO   [5]
------------------------------
 Sure. So, sales to partners, here you have an increase in sales to Nissan and to Daimler. Part of this is related to their own volume plan and their own cycle plan, but part of it is also -- relates to new product that we have to Daimler. We have this year the Citan LCV that we didn't have last year, plus sales of engines, mechanical components, and diesel engines that are sourced by Daimler that we didn't have last year.

 So, that number is both their own performance as well as new business that has been concluded with them relating to agreements that were signed in prior years but that didn't yet have -- that hadn't been translated into actual sales.

 In the Others box, the good news is parts and accessories after -- and this is also in relation to the better environment in Europe. So, there is an increase in sales of parts and accessories to the network, but in terms of --.

 And hopefully that answers your question on those two boxes.

------------------------------
 Thomas Besson,  Kepler Cheuvreux - Analyst   [6]
------------------------------
 Yes. Thank you very much.

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [7]
------------------------------
 Jerome speaking. On partners, I think that we have started in India our sales to Nissan. As you know, the Terrano, which is a Duster-like vehicle. And they have started with a very good momentum, and this also was not in our accounts last year.

------------------------------
 Thierry Huon,  Renault SA - Director of IR   [8]
------------------------------
 Next in line?

------------------------------
Operator   [9]
------------------------------
 Rabih Freiha, Exane.

------------------------------
 Rabih Freiha,  Exane BNP Paribas - Analyst   [10]
------------------------------
 Rabih Freiha, from Exane. I have a few questions, please. Coming back to the question from Thomas on the sales to partners, could you give us an idea what the drove-through to operating profit usually is for this part of the bridge? That's my first.

------------------------------
 Dominique Thormann,  Renault SA - EVP, CFO   [11]
------------------------------
 No, Rabih, we don't disclose the margin business that is conducted with partners.

------------------------------
 Rabih Freiha,  Exane BNP Paribas - Analyst   [12]
------------------------------
 Okay. No problem. Regarding your inventories, if I'm not mistaken you had said many times that around 50% of the inventory was outside of Europe. Maybe if you would give us an idea what that number of days of sales for inventories outside of Europe is, please?

 And also, if I look at this earnings season, you had a lot of suppliers, OEMs, saying that, actually, the problem is not only FX but also demand getting weaker from higher interest rates. So, if you could give us an idea about how your sales looked like in Brazil or Argentina and Russia in April, please?

------------------------------
 Dominique Thormann,  Renault SA - EVP, CFO   [13]
------------------------------
 Okay. I'll take your first question on inventory. Broadly, inventory is a function of your sales pattern, the sales mix. And roughly, if you look at 2013, we were roughly 50/50, and therefore, depending on the supply chain, you'll have variances that will relate to logistics, clearing customs, et cetera, because we have export markets where we don't produce locally.

 But on our key markets, the number of -- and if the distribution is done in South America and it's similar to western Europe, for example, in terms of dealers, franchise dealers, sales financing, et cetera, you'll find a similar number of days supply. Very different in countries where you don't have dealer financing or floor plan financing in place, such as north Africa. So, it's, in broad terms, depending on your sales mix, the inventory has landed, where sales are going to occur.

 Then, the difference year over year is in the momentum of the respective markets. So, right now, we're chasing after a rising European market. I said in my remarks that Europe, with hindsight, we undercalled the volume growth in Europe. So, we are building to a rising order book. However, in the key export markets and some of the key emerging markets, demand fell much more sharply than we had expected. We had dialed back, but clearly that's going to take a few weeks for that to be better in balance.

 So, compared to the average that I gave you, the global number that I gave you, we are well below that or below that number if you take just western Europe, or Europe as a region, and we would be above that number in emerging markets. But once again, some of this is very temporary and exacerbated by the situation in Argentina, where we have the currency situation.

 So, I'll hand over for your question on the demand patterns in those emerging markets to Jerome.

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [14]
------------------------------
 Okay. Clearly, for Argentina, we have some difficulties to see how the market will be for 2014. For the time being, it's a double-digit drop in this. And with this ForEx issue, since most of the cars sold in Argentina comes from outside Argentina, especially from Brazil, it may affect the market.

 But it's very difficult to -- because what the central bank is giving us is completely unpredictable. We received money yesterday higher than what we were expecting, and maybe tomorrow we don't know. So, it's rather difficult to predict.

 What we can say is that having the policy that we had until now with some stocks available, we were ready any time we had the foreign currency to import the car and to catch the market share that was available for us and maybe not for the others. This is the reason why in March, for instance, we were number one in Argentine market.

 In Brazil, for the time being, I would say the market is negative, 1.8% negative. Here again, many of us, we were expecting a slight positive market with the World Cup effect and all that stuff, which apparently did not happen. But the segment of car which are the most affected is mostly, what we call, the carro popular. It's the lowest segment of the market, where we are not exposed, I would say, because we don't have this specific product.

 And as far as we are concerned, we are doing quite well. We have increased our market share compared to last year, by 1.3 points, and normally we should continue on this specific momentum, because we have replaced the Logan with the new Logan which is absolutely well accepted on the market, very good acceptance. It was launched late last year. And we're going to launch the renewal of Sandero and Sandero Stepway during the year. So, we have a product animation, I would say, which is quite positive, and normally we should continue with an increased market share in 2014.

 To be honest, we are cautious on this evolution of the market and, for instance, in order not to exceed our stock level, we closed the plant last week during Sundays. So, we are making some adjustment permanently on the specific countries which are, as you may guess, sometimes difficult to predict.

------------------------------
 Rabih Freiha,  Exane BNP Paribas - Analyst   [15]
------------------------------
 Thanks. Just one last quick follow-up on Russia. I think the auto association there was saying that some consumers anticipated the hike in prices and there was some pre-buy in Q1. Are you seeing some slowdown in Q2 after that pre-buy?

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [16]
------------------------------
 For the --. We have been affected by the global market, but we have been mainly affected by the fact that our lineup was at the end of their life cycle -- Logan and Sandero. We're going to renew them. We had last week a huge convention with the new Logan. Here again, it was a very good success. So, I'm quite confident on the volume that we're going to sell in Russia.

 I cannot confirm what you say regarding the anticipation movement that you are referring to, because we have not been really -- we have not noticed that as you noticed.

------------------------------
 Rabih Freiha,  Exane BNP Paribas - Analyst   [17]
------------------------------
 Okay. Thank you.

------------------------------
 Thierry Huon,  Renault SA - Director of IR   [18]
------------------------------
 Next in line?

------------------------------
Operator   [19]
------------------------------
 Philip Watkins, Citi.

------------------------------
 Philip Watkins,  Citi - Analyst   [20]
------------------------------
 Thank you very much for taking my questions. I just had two. You've obviously commented on pricing in the first quarter in emerging markets being relatively positive. Actually, how do you see the pricing environment for South America and Russia for the rest of this year?

 And the second question, actually, is just on the financial services business. With the rise in interest rates, has there any material change at all in credit losses for the customers in South America and Russia?

 Thank you.

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [21]
------------------------------
 As far as the prices are concerned, I would say we are following very closely the evolution of the currencies and devaluation in those countries. And I can confirm that for, let's say, main countries -- Argentina, Brazil, Russia, Turkey -- we have increased our price above the market average.

 So, this is something that we are very cautious with, and we are following that very closely. And for the time being, this is exactly what we have done, increasing our price above the market average.

------------------------------
 Philip Watkins,  Citi - Analyst   [22]
------------------------------
 And that should sustain, as well, for the rest of the year?

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [23]
------------------------------
 Yes. Yes, for sure. This is a policy that we want to keep. And the reason why we can do that, frankly, is because on these specific countries that I was referring to our product lineup is very attractive and very successful.

 So, we have the potential to be ahead of the market and to be, let's say in Russia, we are the price leader. We are the reference for the market. We are increasing our price for that.

 So, I think that --. It's clear that if the devaluation is going further, we will keep on going on this policy that we have implemented so far.

------------------------------
 Dominique Thormann,  Renault SA - EVP, CFO   [24]
------------------------------
 Philip, on the banking side, here too it's -- what I'm going to tell you is going to be very different if you're referring to Europe or outside of Europe.

 Inside of Europe, or within euro zone, euro land, excluding the UK and Switzerland, I'm seeing absolutely no pressure on interest rates and, if anything, I think if you're following this, there's a lot of discussion and debate at the central bank about deflation and how to avoid it.

 The first quarter run rate in Europe came in at only 0.5%. So, there's talk about quantitative easing -- yes/no, how it's going to happen, et cetera. That is putting -- there is no pressure on increases in interest rates. And from what I can see, we have never borrowed at these low levels in as far as we can find in our history books, at least in the Company, and that's a combination of the absolute interest rate as well as the drop in our spreads.

 Outside of Europe, clearly there is a rise in interest rates in the countries that Jerome has just commented. You have extreme situations like Argentina, but then you have other situations such as Brazil, where interest rates are somewhere above 10%, going into --. But you also have high inflation.

 So, I can't say that there is a single answer to your question. But if I look at the quality of the books that we're buying, of the credit losses that we're experiencing today, there is nothing that I'm seeing that's out of the ordinary and, if anything, we've got a few basis points better here and there. But nothing at all on the interest rate front that's a concern right now.

------------------------------
 Philip Watkins,  Citi - Analyst   [25]
------------------------------
 Great. Thank you.

------------------------------
 Thierry Huon,  Renault SA - Director of IR   [26]
------------------------------
 Next in line?

------------------------------
Operator   [27]
------------------------------
 Laura Lembke, Morgan Stanley.

------------------------------
 Laura Lembke,  Morgan Stanley - Analyst   [28]
------------------------------
 Thank you for taking my questions. I've also got two or three, if I may. The first one is just on the French market, which is obviously lagging the general European recovery a little bit. So, I'm just wondering if you could give us a sense what your expectation is for the market as a whole in 2014 and also for yourself, especially given that you have a big range renewal coming up in the C&D segment?

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [29]
------------------------------
 Yes, the French market, it's true that it's lagging a little bit behind the rest of Europe. Nevertheless, over the last weeks, we have experienced a rather positive evolution of the market, which is quite good.

 But what I would like to stress on these specific topics is that the performance of our French operation, because we have been able during this first quarter to gain 1.5 points market share, which is really outstanding.

 But the most relevant thing to be noticed is that this additional market share is also through a good channel, because the retail channel has significantly increased during this period, and around 1.5 points we gained in the retail channel for France, which is very good. And it's not only because Dacia range was very successful -- and as you know, Dacia operations are mostly operated with retail channel -- but it's also Renault. Renault brand gained market share in the retail.

 So, we were quite happy with the --. And this comes from the fact that our product, let's say, the Clio, Captur, and the Dacia range are doing very well, and we had some specific operation on the C segment in order to sustain this C segment, because it's a lineup which is getting a little bit older. And these operations were focused also on retail.

 On the specific French market, we are getting more confident, and this is the reason why we have revised a little bit our forecast for the year. We were at something around 0% to 1%. We are now at 2% to 3%. And what we have in our order book makes us confident on this market.

------------------------------
 Laura Lembke,  Morgan Stanley - Analyst   [30]
------------------------------
 So, is this also France, the numbers you just gave?

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [31]
------------------------------
 Yes. Yes, for France.

------------------------------
 Laura Lembke,  Morgan Stanley - Analyst   [32]
------------------------------
 Okay. And then, maybe one more question, related to pricing. On the one hand, could you give us a bit of a sense what kind of discounts you currently have to grant for the outgoing models in the C and D segment range?

 And then, also, with respect to the emerging markets, you mentioned that if currency continues to deteriorate that you would be willing to basically push through further price increases. I guess some of your competitors are doing the same. I'm just wondering how much of these price actions do you think the market can actually absorb?

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [33]
------------------------------
 This is the most difficult question to answer.

 I can't [say] in detail, by giving you the detail for the rebates per car, per model. What I can tell you is that we are following the guide that we have been establishing for some months now, which is the TPVA positioning. We want our price to be above the basket in Europe, and we are currently above the basket.

 Obviously, looking at the different models, the situation might be a little bit different, lets say. Captur, Clio are very well positioned against the competitors. C segment, it's a little bit -- the gap obviously with the basket is reduced because of the age of the segment, of this model.

 There is one segment for which the competition is really fiercer than before; it's LCV. LCV, the market is not recovering, and obviously all car makers have facilities on these products and the competition is very tough. Nevertheless, we are the leader in the European market. So, we try to take advantage of being the leader to price a little bit better than the others. But this is a segment where the competition is the fiercest.

------------------------------
 Laura Lembke,  Morgan Stanley - Analyst   [34]
------------------------------
 Okay. Great. Thank you.

------------------------------
Operator   [35]
------------------------------
 Kristina Church, Barclays.

------------------------------
 Kristina Church,  Barclays - Analyst   [36]
------------------------------
 If I could just come back to pricing, obviously you're talking about strong pricing in emerging markets. I was just wondering if you could give a little bit more color more generally on Europe? Is pricing still negative in Europe for you? And if so, to what sort of level?

 And then, also, in terms of your order book, it's obviously looking very strong for the first quarter compared to the crisis. Could you give any review on how that's spread between -- has it improved significantly in March? And are you seeing signs of it recovering further?

 And then, finally, just coming back on the FX point, do you see any -- do you take a view now that FX, the impact for the year, is any different from what you had in your planning in December?

 Thank you.

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [37]
------------------------------
 No, on the order book I can tell you that it's getting better weeks after week. And what we can see at the end of March, what you could see on the chart, is that the situation is quite -- is improving, is improving week after week.

 So, for the time being, we are confident on the market, based on what we have in our order book. But as you know, we are not making any changes with our competitors. We don't know what their order book is. But as far as we are concerned, it reflects certainly the success of our products.

 Regarding the price positioning outside Europe you were talking about?

------------------------------
 Kristina Church,  Barclays - Analyst   [38]
------------------------------
 No, pricing in Europe.

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [39]
------------------------------
 The pricing in Europe is still --. There is no relax on the competition there, definitely. So, the pricing is still, I would say, stable negative.

------------------------------
 Dominique Thormann,  Renault SA - EVP, CFO   [40]
------------------------------
 Hi, Kristina. It's Dominique. On your foreign exchange question, like everyone we made a number of assumptions at the beginning of our fiscal year, written into our budget. What we're seeing at the end of the quarter is within the boundaries of what we had predicted, rather on the high side.

 But what matters is our ability to offset some of this, some of it -- we've had the conversation tonight -- through pricing. But it also depends on the relative level of localization compared to competition. So, in some markets, we are relatively better localized than our competition, and this allows a bit more flexibility on pricing and actions to offset the impact.

 So, it's a mixed bag, but it's a general trend which we had, once again, called out very clearly as the biggest risk factor in the beginning of the year. So, we're within what we predicted, but rather on the high side.

------------------------------
 Kristina Church,  Barclays - Analyst   [41]
------------------------------
 Thank you.

------------------------------
Operator   [42]
------------------------------
 Charles Winston, Redburn Partners.

------------------------------
 Charles Winston,  Redburn Partners - Analyst   [43]
------------------------------
 Just two quick questions for me, as well. Just on the pricing side -- sorry to go back to this -- but is there any point where the strength of the order book would actually give you some confidence to maybe even start trying to move on pricing in Europe as well as outside? In other words, is there any way you could perhaps trade off some of the improvement in the volume side to perhaps try to take a little bit of pricing?

 And the second question is, you made a comment right at the end of your presentation of slide 19, which I wrote down and I just want to make sure I've got it right. I think you said something along the lines of you expected a number of emerging markets to show an improvement in coming months. Now, I wasn't too certain whether you were referring to the inventory position in the emerging markets in coming months improving, or actually some improvement in the underlying sales situation. And I was just wondering if you could clarify that?

 Thank you.

------------------------------
 Dominique Thormann,  Renault SA - EVP, CFO   [44]
------------------------------
 Charles, it's Dominique. I apologize if I wasn't clear on that. What I intended -- what I said is sequential improvements. It's not year-over-year comparisons. So, there's been a sharp drop, for example, in the beginning of the year, but sequentially we're seeing some of these markets actually recovering slightly.

 Now, how long that will last? But at least this is the observation that we have today. It's not as steep as, say, the January/February period. The March/April period is a bit better. For example, Algeria. Turkey might also be in the list. But volatility -- the difficulty clearly is with the ability to predict these markets. I'd also put India in the basket, as well.

 So, sequentially, but certainly not year over year.

------------------------------
 Charles Winston,  Redburn Partners - Analyst   [45]
------------------------------
 Clear. Thank you.

------------------------------
 Jerome Stoll,  Renault SA - EVP, Chief Performance Officer   [46]
------------------------------
 To answer your question regarding the confidence we may have on the price based on the order book that we have already collected, it depends on the model. I am very confident on Captur and Clio because, frankly, these models are doing very well. On Captur, we are even -- it's a double benefit because the prices are good and we are [underselling upper version]. So, we are very confident on this model.

 On the other hand, when you look at the C segment or LCV, obviously the situation is a little bit different. We have a good -- very good performance on Scenic; lower performance on Megane, [Saloon] or Estate. But nevertheless, as far as these models are concerned, obviously the price pressure is tougher than on the other one.

------------------------------
 Charles Winston,  Redburn Partners - Analyst   [47]
------------------------------
 Okay. Great. Thank you.

------------------------------
 Thierry Huon,  Renault SA - Director of IR   [48]
------------------------------
 Okay. Thank you very much for being with us this evening, and if you have following questions, do not hesitate to call Alain or myself. Have a good evening. Bye.

------------------------------
Operator   [49]
------------------------------
 Ladies and gentlemen, thank you for your attendance. This call is being concluded. You may now disconnect.






------------------------------
Definitions
------------------------------
PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the 
Transcript has been published in near real-time by an experienced 
professional transcriber.  While the Preliminary Transcript is highly 
accurate, it has not been edited to ensure the entire transcription 
represents a verbatim report of the call.

EDITED TRANSCRIPT: "Edited Transcript" indicates that a team of professional 
editors have listened to the event a second time to confirm that the 
content of the call has been transcribed accurately and in full.

------------------------------
Disclaimer
------------------------------
Thomson Reuters reserves the right to make changes to documents, content, or other 
information on this web site without obligation to notify any person of 
such changes.

In the conference calls upon which Event Transcripts are based, companies 
may make projections or other forward-looking statements regarding a variety 
of items. Such forward-looking statements are based upon current 
expectations and involve risks and uncertainties. Actual results may differ 
materially from those stated in any forward-looking statement based on a 
number of important factors and risks, which are more specifically 
identified in the companies' most recent SEC filings. Although the companies 
may indicate and believe that the assumptions underlying the forward-looking 
statements are reasonable, any of the assumptions could prove inaccurate or 
incorrect and, therefore, there can be no assurance that the results 
contemplated in the forward-looking statements will be realized.

THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION
OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS,
OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.
IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER
DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN
ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE
MAKING ANY INVESTMENT OR OTHER DECISIONS.
------------------------------
Copyright 2018 Thomson Reuters. All Rights Reserved.
------------------------------