Renault Sa Unsp/Adr

Good morning everyone and welcome to Renault Group first quarter 2024 revenue. This presentation will be made by Thierry Pieton, CFO of Renault Group and will be followed by a Q&A session. Thierry, the floor is yours.

Thank you, Philippine. Good morning to all and good afternoon to everyone and thanks for joining us this morning. I'm very pleased to be with you this morning to present our revenue figures for the first quarter of 2024. which incidentally is the highest first quarter we've had since prior to the COVID period. So group revenues was up 1.8% in Q1 at 11.7 billion euros. At constant exchange rate, it was up 5.9%. Automotive revenue stood at 10.5 billion euros, down 0.7%. At constant exchange rate, it increased by 3.6%. Mobility services contribution amounted to 15 million euros, up 6 million compared to last year, and mobilized financial services revenue increased by 27.9%, mainly driven by the rise in interest rates and higher average performing assets. Let's drill down in the automotive revenue. Automotive revenue was pretty stable compared to 2023 Q1. It included 4.3 points of negative exchange rates, mainly related to the Argentinian peso and to a lesser extent the Turkish lira devaluations. Again, at constant exchange rate, it increased by 3.6%. Volume effect was negative 4.6 points in the first quarter. Registrations increased by 2.6% at Renault Group level this quarter compared to Q123, despite a very tough comparison basis. All three brands contributed to this growth. Renault brand continued its progression with a 3.1% worldwide growth. In Europe, the brand was up 4.5% and remains on the podium of the PC and LCV market. On LCVs in particular, Renault brands enjoyed a growth of 12.5%, outperforming a market up 3.6%. In Europe, with a 12.9% growth and a market up 12%, Renault confirmed its second place and the first place in commercial vans. Dacia sales were up 3.2% worldwide. In Europe, its core market, they grew by 3.6%. and Dacia confirmed its second place on the retail channel. Alpine continued its double-digit growth after three years of consecutive progression with more than 1,000 units sold. It delivered an 89% volume increase versus the first quarter of 23, benefiting from the very strong success of the A110R and favorable comps as Q123 was relatively low. All in all, we expect volume to accelerate throughout the year, thanks to the numerous product launches ahead of us. More on this topic later. Let's take a look at the vehicles that drove this 2.6% growth in registrations. For the Renault brand, let me focus on four key vehicles of our current lineup. Megane Tech continued to attract new customers with a conquest rate still at around 50%. By the way, its residual value in percent continued to increase this quarter. Austral and Espace continued to support our comeback on the sea and above segments and to deliver record margins. Clio sales grew 17% versus last year. Clio was the best-selling vehicle in France in 2023. All these vehicles already benefit from the cost reduction we're delivering, and in some cases, we took advantage of this to lower selling prices while posting higher contribution margins than the previous generations. Some examples for you. The new Clio was launched 650 euros cheaper than the previous generation for hybrid versions and 2,000 euros for ICE versions in France. Espace was launched between 4K and 10K euros cheaper than the previous generation. And finally, the new Captur that's currently being launched is 900 euros lower for ICE versions and 1,100 euros on hybrids. Renault's lineup is also getting increasingly electrified with 48% of passenger cars that are either EV or hybrid in the first quarter. This represents an increase of eight points year on year and makes us very confident to reach our 2025 CAFE targets. Dacia's sales performance benefited from the success of its new brand identity deployed on all four models. Sandero, Dacia's best-selling vehicle, recorded strong growth at plus 20% and became, at the end of March, the number one model sold on the European market, all channels combined. Jogger remains the most affordable family car in Europe. Boosted by its hybrid version launched a year ago, Jogger sales grew by 11%. Regarding the two other pillar models, current Duster's end of life figures were excellent and both Duster and Spring will be renewed this year as we will see later. A110 still performs very well on top of the Turini version that continues to be extremely attractive. The teams are doing a great job across the range, A110, A110S, GT, and R. Eighty-five percent of our sales now are positioned on the top of the range versions, S, GT, and R, in the first quarter. Now let's have a look at the inventories. As mentioned previously, the volume effect was negative 4.6 points this quarter as the 2.6% growth in registrations was more than offset by a higher destocking of the independent dealers network, which was 40K units higher compared to the first quarter of 2023. Destocking was 73,000 units in Q124 versus 33,000 units last year. At the end of March, total inventories represented 530,000 vehicles, consistent with our strict policy to keep inventories at very healthy levels It decreased significantly compared to March 23, which was at 580,000 units, so 50,000 units more, less, sorry, and evolved in line with normal seasonal patterns. This level of inventory is fully supported with our very sound order book, which stood at 2.5 months of forward sales at the end of March. This order book reflects the success of our products and a very good start of the year in terms of order intake. Again, even though the key product launches for 2024 are still ahead of us. It's important to note that the portion of these inventories that's assigned to end customers has continued to increase over the quarter. another proof of its health. Sales to partners generated a positive effect of 2.4 points thanks to the increased R&D billings in line with a ramp-up of the group's partnerships. In Q1, we recorded a robust price effect of 4.1 points on already tough comps, despite some of the price repositionings that I described earlier on Clio, Espace, and Keptio, for example. It reflects the continuation of our commercial policy focused on value and price increases to offset currency impacts. As already announced, in 2024, we will continue to have positive pricing, but obviously not to the same extent as we had over the last few years. The price effect will mostly offset foreign exchange. Here are some key data points to illustrate our relentless focus on value. Firstly, the C-segment and above represented 37% of the Renault brand sales with a range of four vehicles, Arcana, Megane E-Tech, Austral and Espace. Secondly, the high-end versions of our last launches continue to represent a large majority of our mix. For instance, they represented 66% of Espace sales, 69% of Jogger, and 63% of Megane. This highlights the attractiveness of these vehicles. Third, we kept a strong discipline in channel mix. The Renault brand kept a healthy one in two sales to retail customers in Europe, while Dacia remained at a high level at more than 80%. Finally, our stable MSRP policy and our relentless focus on quality have enabled our residual values to significantly increase in all brands over the last quarters. This is key as it provides additional competitiveness to our vehicles, especially for customers that acquire the car with the financing, as it helps keep monthly installments low. The product mix effect was stable at plus 0.1 points. The good performance on the Renault brand C segment and above vehicles with higher average selling prices had a positive effect on mix. This effect was offset on one hand by the end of life of Zoé, which had a selling price above the group's average, and on the other hand by strong volumes on Twingo, Kiyo, and Sendero, which have average selling prices below group average. All in all, product mix will improve subsequently during the year in line with the upcoming launches. By the way, as I already mentioned in previous calls, flat mix effect on revenue doesn't mean flat on margins. Each new car is launched with financial metrics that are much better than the previous generation. The geographic mix was slightly positive at 0.6 points, mainly driven by a higher relative contribution from Europe. To finish the analysis of the revenue change, the other bucket contributed positively for one point, mostly thanks to the strong activity for parts and accessories, and our margins are not complaining. Now, let's switch to mobilised financial services. New contracts production was stable over the first quarter 24, with an increase on new vehicle sales, offsetting a decrease on used vehicles, driven by our focus on retail channels, which has kept second-hand cars relatively scarce on the market. The average performing assets increased by 9.8% at €54.2 billion, mostly thanks to new vehicle sales growth over the last year. All in all, mobilized financial services revenues were up 27.9% to €1.2 billion, mainly driven by higher interest rates, the increase in average ticket per vehicle, and the volume growth described above. Overall, Q1 2024 revenue therefore came in line with our expectations and therefore we fully confirm our 2024 financial guidance with a group operating margins superior or equal to 7.5% and an automotive operational free cash flow superior or equal to 2.5 billion euros. During the full year results, we shared our views regarding the 2024 challenges and opportunities for Renault Group. These have not changed, and our assumptions are still valid. Our upcoming product offensive and the acceleration of cost reduction definitely remain the key drivers of our operational performance and our strong cash generation in 2024. Our three strong and complementary brands are today all set to support the strongest product offensive ever known at Renault Group. So the best is still to come. 2024 will be a historic year with 10 brand new vehicle launches across our brands. Seven new launches for Renault brand, plus two facelifts, two for Dacia and one at Alpine. Starting with Renault, Renault Brand will enjoy a full range of new products, both on the BEV market with Scenic and Renault 5, and on the ICE and hybrid markets with Symbios, Rafale, and Captur Phase 2. International markets will also be addressed, specifically with Cardian, Renault Duster, and a D SUV for the South Korean market. And finally, on the LCV market, with the arrival of Master, we will have the most up-to-date LCV lineup in Europe, with all vehicles available in full electric versions. Dacia will renew two of its pillar models this year. The all-new Duster, for which we opened orders mid-March, recorded already more than 20,000 orders during its first 30 days, this without any car actually visible in the dealership network yet. The version mix is also promising. Combined with the current version of Duster, It represented around 30,000 orders all in all for Duster in one month. Our new Duster launch paves the way for the upcoming arrival of Dacia's first full-size C-segment SUV, Bigster, which will occur next year. The new spring orders will be opened across Europe in the second quarter, continuing to make EVs affordable to the many, with its price positioning below €20,000. Alpine finally will also launch a new model this year, the A290 100% electric. It will be the first car in Alpine's dream garage made of three electric models. The future hot hatch B-segment car will be revealed in Le Mans on June 13th and will reach the road towards the end of 2024. In addition to executing flawlessly on this exciting product roadmap, we're 100% focused on the other levers of our performance improvement and official capital allocation strategy. As mentioned previously, we remain religiously faithful to our value over volume commercial policy, but this year is also the year of the acceleration of our cost reduction program. At the same time, our open partnership approach is an additional lever of performance improvement, allowing us to share investments and risks, and more importantly, to keep technological flexibility. This enables us to generate cash sustainably, semester after semester, in line with our commitments, and we don't intend to stop. Let me take a moment to look at an example of our innovative partnership strategy. As you saw last month, we successfully created Flexis with Volvo Group and CMA CGM to introduce a breakthrough player in electric vans and last mile delivery. Flexis is completely unique. It's the perfect full electric product slash solution to enable the reduction of total cost of usage by up to 30% for our customers. Flexis is one more resolution project that we're delivering. More to come very shortly. Another important development in the first quarter was the second monetization of Nissan shares. We initiated, as you remember, a first disposal in December of 2023 with the sales of 211 million shares. This was followed by a second move in March 2024 of 99 million shares. These two sales represented together a cash inflow of 1.1 billion euros, which contribute to improve our net financial position. This is not over. We still have 888.6 million monetizable shares, representing a potential cash inflow of circa 3 billion euros at today's Nissan stock price. This future cash inflow will allow us to accelerate our deleveraging while developing our activities and returning cash to our shareholders and, of course, Until the effective disposal of these shares, Renault Group continues, as you know, to receive Nissan's dividends. As a conclusion, Renault Group has opened a new chapter with fundamentals that are based on performance improvement and official capital allocation on one side and flexibility on the other. I already touched on our strategy of performance improvement and capital allocation, so I won't come back on it. What's also important to note is that we have the flexibility now to adapt to the evolution of the powertrain mix in Europe and outside of Europe. We have on one side Ampère, our tech growth weapon for EV and software, and on the other side, our high-cash generating businesses for ICE and hybrids with power and horse. This concludes my presentation, and we're now ready to answer your questions. Thanks for your attention.

Thank you, Jay. So we'll now start the Q&A session, and we'll start with the first question from George Galliers, Goldman Sachs. George, please, could you open your mic?