Renault Sa Unsp/Adr

Good morning, everyone. We are pleased to welcome you for our presentation dedicated to our Q3 revenue with Thierry Piéton, Group CFO, Fabrice Cambolive, CEO of Renault Brands, Denis Levotte, CEO of Dacia Brands, and Xavier Martinet from the Dacia team. Thierry, the floor is yours.

Thank you, Philippine. Good morning to all, and thanks for joining us this morning. I'm pleased to comment today on Q3 revenue and commercial performance, but let me first give you an update on the strategic and commercial developments that took place over the last quarter. Renolution is moving ahead quickly with several projects that we're rolling out at the same time. So let's start with Horse, our business dedicated to ICE and hybrid powertrains. The carve-out was completed on July 1st. Day one was a real success. We had 9,000 employees, eight factories, and three R&D centers that were transferred without a glitch. On July 11th, we signed the JV agreement with Geely. The closing is expected in the upcoming months and will lead to the deconsolidation of the horse entities and the start of the new JV. At the same time, we're pursuing our fruitful discussions with Aramco, who would also join the new co in the coming months. Let's move on to Ampère. The carve-out will be completed in two weeks from now. On November 1st, Ampère will be a dedicated entity, 100% focused on EV and on software. The carve-out provides for us unique conditions to accelerate our work on performance and innovation. It also very clearly enables us to better identify cost reduction levers, Between our current generation of vehicles and the next one, as you know, we will reduce costs by 40%. This improvement will be continuous, and the benefits will materialize on vehicles in production and in upcoming launches. All this will be covered in detail during Ampers Capital Market Day, which we have announced will take place on November 15th. In September, we revealed Scénic, which is the second car of Ampère's EV offensive at the heart of the European market. With Scénic, we will offer to European families an all-rounder EV, able to become the first car of the household. Scénic is a high-tech car with benchmark connectivity, thanks to Google Automotive Services. It has best-in-class range with up to 625 kilometers WRTP. It's well-positioned from a pricing perspective, with an entry price at around 40K euros, less expensive than key competitors, and already has a TCO, meaning a total cost of ownership, on par with hybrid cars. In addition, this car is the flesh and bones materialization of our ESG strategy. It's a car born with a purpose which increasingly matters, especially to our fleet customers. It's built with up to 24% of recycled materials and up to 90% recyclable. Its cradle-to-grave CO2 footprint is significantly lower than EV pure players. With Scenic, we're demonstrating that we can offer a product with best-in-class specifications at a competitive price. And this car will be on the road, as you know, early 2024. Let me now take a minute to speak about the Flexus project, which we announced a few weeks ago. For us, this is a true game-changer in the path of electrification in the LCV world. As you know, Renault Group is already a leader in LCV, and Flexis is our answer to address new trends for this fast-growing market in Europe. Flexis will develop and produce Flexivan, which is a breakthrough LCV in at least three ways. First of all, it will be the first car to use our new software-defined vehicle technology, which enables the vehicle to remain up-to-date throughout its life. This technology will improve its business performance through monitoring of delivery activity, enabling reduced loading time, route optimization, improved vehicle fill rate, onboard predictive maintenance, et cetera, et cetera. Secondly, its fully electric LCV skateboard platform will offer high modularity for different body types at a low cost and will be breakthrough from a safety perspective. All in all, it will enable a 30% total cost of usage reduction for logistics players. Renault Group and Volvo have signed a binding agreement to launch a new company with an initial 50-50 equity split. CMA-CGM Group would also join the new company with a closing expected early 2024. Flexis relies on the strategic assets of the three partners. We're bringing the industrial expertise, the know-how in LCV, in EV, and in software-defined vehicle. Volvo Group will bring B2B relationships with logistics players, its whole suite of truck services transferable to LCV, and its international footprint. And CMA-CGM will bring its logistics ecosystem expertise, its customer network, and the ability to co-construct new services adapted to end-to-end supply chain. This cooperation will open significant innovative new market opportunities for Renault Group and RCV, with optimum time to market and shared investments. I'll conclude these highlights with a brief status on our agreement signed last July with Nissan. They'll be effective by the end of the year. At this point of time, 28% of our Nissan shares will be transferred to a trust and will become monetizable. Of course, a sell-down will be coordinated with Nissan, as they have a right to first offer, but will be free to sell when we deem appropriate. Let's now switch on sales and revenue for Q3. Group revenue was up 7.6% in Q3 at 10.5 billion euros. At constant exchange rate, it was up 13.8%. Mobility services amounted to 11 million euros, up 2 million compared to last year. Mobilized financial services revenue increased by 36.4%, mainly driven by the rise in interest rates and higher average performing assets. In the first nine months of the year, group revenue was up 21.1% to reach 37.4 billion. It was up 25.3% at constant currency. Let's now focus on the automotive revenue. Automotive stood at 9.4 billion euros in Q3, up 5% at constant exchange rate. It was up 11.3%. The negative exchange rate's effect of minus 6.3 points is mostly linked to the Argentinian peso and, to a lesser extent, to the Turkish lira. Let's take a look at the different drivers of this evolution. The volume and geographic mixed buckets were together positive at 1.5 points. Volume-wise, the group registered 511,000 units in the quarter, a 6.1% increase in the third quarter of 22. Over the first nine months of the year, the group sales reached more than 1.6 million units, an 11% increase, with Renault up 11.4%, Dacia up 16.7%, and Alpine up 15.9%. Back to the quarter, from a geographic standpoint, sales in Europe were up 15.3% at the group level, driven by a very strong performance of the Renault brand, which rose by 25%. This clearly demonstrates the success of our new launches. This led to a higher mix of European sales and explains the positive 3.1 points of geographic mix effect. Renault brand global sales were up 11% and again plus 25% in Europe versus Q3 2022. Renault confirms its ranking as second best selling brand in Europe with the first base both in passenger cars and LCV in France. Renault continues to outperform on the LCV market. Sales were up 21% worldwide and 25% in Europe on the nine months. Renault is the European leader on the commercial van market. Dacia sales were up 2.4% worldwide. In Europe, Dacia sales were up 1.6% to 127,000 units on tough comparatives. Dacia is ranked number two for retail sales in the region. Alpine sales grew by more than 30% thanks to the continued momentum on A110, supported by limited editions. Despite the 6.1% growth in retail sales, volume effect was negative by 1.6 points. The increase in registrations was offset by higher destocking in the independent dealers network in Q3 2023 compared to Q3 2022, with components and logistics conditions getting back to normal. Indeed, global inventories stood at 542,000 units in September compared to 569,000 units in June, with a strong destocking this quarter at independent dealers, which were down 93,000 units since June. This dealer destocking more than compensated the seasonal increase of group inventories. The overall improvement is in line with our objective of being below a total level of 500,000 units at the end of the year, with an acceleration of the drop that will take place in the fourth quarter. This level of inventories, again, is supported by a high proportion of vehicles that are affected to customers and should also be put in perspective with a still high order book, which stands at 2.5 months of forward sales. This will remain, by the way, above our targeted level of two months until the end of the year. Looking now at the product mix effect, it was muted in Q3, which is counterintuitive given the product launches that we've had since last year. It mainly results from strong sales of Clio phase one, with the revenue per unit lower than the group's average. In addition, Megane eTech invoices were lower this quarter compared to last year due to the destocking effect that I already mentioned. These two effects offset the strong positive impact that came from Austral and from Espace. Price effect was still a strong positive at 7.5 points. As you know, this price effect started to ease, mostly due to tougher comps and less pressure from raw materials. Nevertheless, it will remain a strong revenue growth driver throughout the last quarter and beyond. This increase mainly comes from our commercial policy focused on value. It also integrates our actions to compensate exchange rate impacts. As in previous quarters, our pricing effect is driven by our performance in the following areas. Firstly, a continued discipline in channel mix. The Renault brand keeps a healthy channel mix with one in two sales to retail customers in Europe. Secondly, a strong control over variable marketing expenses and incentives to dealers. And finally, the continued favorability of our trim mix, thanks to the attractiveness of our range. Let me give you an update on the products supporting our performance. First, Mégane eTech is still the number one EV of its segment in France in the third quarter and accounts alone for 2.2% of the BEV market in Europe. It remains a conquest product in Europe with around 60% of our clients which are new to the Renault brand. We sold 35,000 units year-to-date, of which 70% are high-trim versions and over 80% are equipped with the most powerful powertrain. We remain focused on value, even in this challenging environment, and on customer satisfaction and residual value. The residual value of Megane Tech rose by two points since the beginning of the year. Month after month, Austral confirms its success. Thanks to Arcana, Megane and Austral, Renault brands grew by 24% on the European C-segment in the third quarter. As an illustration, Austral took the lead of the C-SUV segment in France, which is an important signal for the brand. Sales amounted to more than 60,000 units year-to-date, 65% of which were E-Tech hybrid and 60% in the high-trim versions. Austral is progressively still being commercialized in all targeted countries. Most importantly, financially, Austral delivers the greatest passenger car contribution margin per unit in Renault brand's history. However, this record will soon be beat by ISPAS, which was launched in June, that you can see in the next slide. Espace is an important conquest product for the D segment for us. It shares 80% commonality rate with Austral, thanks to the family program initiated by Gilles Le Bon and his team. This is one of the key drivers explaining why the contribution margin for this vehicle is so high, while we reduced its selling price compared to the previous generation. Its past sales have just started, but the car is off to an encouraging start and will clearly support our margin development in the coming years. The third quarter was also marked by the start of sales of new Clio, the Phase 2. The bread and butter of the Renault brand is posting a higher contribution margin versus the previous generation, thanks again to significant cost improvements. Its hybrid version will further complement the group's electrified offer. Worth highlighting that while ramping up progressively Clio phase two, the phase one enjoys a remarkably strong end of life, as you saw in the mixed explanation. This Renault lineup will be strengthened by important launches for Europe, but also for international markets. Fabrice Cambolive and his team will be pleased to unveil the Renault brand international game plan on October 25th during a live event. Let's now take a look at the Dacia brand. Dacia pursued its good momentum in Q3, supported by the new brand identity. The new Extreme trim level launched at the beginning of the year and simultaneously on all vehicles is working well, representing now one third of orders across the entire range. It attracts new customers and generates incremental contribution margin on already very high levels. Dacia jogger hybrid 140, which was launched in January, represents one out of four jogger orders despite component supply constraints and longer lead times. It's an excellent illustration of Dacia's smooth electrification strategy. Dacia Spring, 100% electric, recorded close to 16,000 sales in Europe in the third quarter of 23. Year to date, it reached more than 43,000 sales. It was again on the podium of retail electric vehicles in Europe last quarter, being the most affordable BEV on the market. All in all, Dacia continues to grow, and we look forward to the launch of new Duster in 2024. which will be revealed by the end of the year. It will ensure the continued success story of our already double-digit operating margin brand. To finish the analysis of the automotive revenue change, our sales to partners contributed positively for 2.9 points this quarter, benefiting from the production of ASX from Mitsubishi Motors, illustrating the common projects that we're restarting with the Alliance. We also benefited from a dynamic LCV market, driving ourselves to Nissan, to Renault Trucks, and to Mercedes-Benz. Now, let's comment on the performance of mobilized financial services. New contracts increased by 5.1%, reflecting the higher level of registrations. Thanks to the group's net pricing policy, the average financed amount significantly increased, and total new financing rose consequently by 15.9%. The average performing assets follow this trend with a 15.6% increase at €52.1 billion, driven by higher new financing and the return to more normal dealers' inventories after the electronic components crisis. As a result, mobilized financial services revenues were up 36.4% to €1.1 billion, mainly driven by the effects described above in combination with higher interest rates. Moving to slide 24, we confirm our guidance for the four-year 2023 with an operating margin between 7% and 8% and an operating margin that's expected in H2 to be above H1, a free cash flow above 2.5 billion euros. All in all, we're confident in the achievement of our targets this year and in our ability to continuously improve our performance beyond that. We'll benefit from the four-year effect of the vehicles that were launched in 2023 and the numerous launches that will take place in 2024 and 2025. These new launches will also benefit from our significant efforts to reduce cost and will therefore deliver much stronger contribution margins than the previous generations. This concludes my presentation. I'm now ready to answer your questions, and thanks for your attention.

Thank you, Thierry. So we'll start the Q&A question with Thomas Besson from Kepler-Chevreux. Thomas, please could you open your mic?