Renault unveils plans to raise operating margin, restore dividend payments

By Scott Kanowsky 

Investing.com -- Renault SA (EPA:RENA) aims to boost its profit margin to above 10% by 2030 and reinstate dividend payouts next year, the French automaker announced on Tuesday, as the firm also laid out plans to spin off its electric vehicle unit.

The Boulogne-Billancourt-based company is also hoping to grow its operating income margin to more than 8% by 2025, while achieving free cash flow of over €2 billion (€1 = $0.9996) per year over the next two years.

Renault pledged to restore dividend payments from 2023 after they were stopped following the outbreak of the COVID-19 pandemic. It said the policy will continue to gradually increase up to a 35% payout ratio of group consolidated net income in the mid-term period. To do so, the group said its "first priority" is to upgrade its debt status to "investment" from "junk." 

Employees' shareholding is seen rising to 10% by 2030 as well, which Chief Executive officer Luca de Meo said will contribute to a "new common culture oriented to value creation."

The moves come as Renault and de Meo look to recover from losses in 2019 and 2020, while simultaneously realigning the business to focus on EVs. Media reports have suggested that Renault will look to rejig its alliance with Japanese partner Nissan (TYO:7201) as part of that restructuring effort.

With this outlook in mind, Renault has outlined a potential initial public offering of Ampere, its pure-play EV and software division, on the Euronext Paris in the second half of 2023.

Meanwhile, the car manufacturer and China's Geely (HK:0175) have inked a framework agreement to combine their technological, manufacturing and research assets into a joint venture with envisaged revenues of €15B.

"Renault Group is one team of teams, benefiting from simplified governance and digital management platforms boosting collaboration and breaking silos typical of traditional organizations," de Meo said.

Paris-listed shares in Renault fell in early trading.