Scan the horizon for predictable markets: Europe, Russia and Brazil would be low on the list. So it is a shame, that French carmaker Renault gives investors plenty of exposure to all these markets. One can only hope that a good performance in one will cancel out a poor one in the others.
Which is what happened in 2014. Full-year results on Thursday beat expectations, with operating profits up almost a third. That was enough to send the shares up 11 per cent. Europe was the star of the show. Renault’s European volumes grew twice as fast as the market. Customers warmed to its Dacia brand (originally developed for emerging markets using old technology). Dacia margins are higher than on cars higher up the range, too.
That compensated for less impressive performances in Russia and Brazil. Sales in the former were down 11 per cent; those in the latter down 7 per cent. Emerging markets are no fun when the party stops.
With so much volatility around, chief executive Carlos Ghosn has been doing what he can to smooth out profits by cutting costs, especially in France. The latest plan could save €5bn by 2016, €0.7bn more than originally expected. On a total cost base of €39bn, that is a decent amount.
Renault expects continued growth next year. Once again, Europe should compensate for weakness in both Russia and Brazil (although it may be able to take market share in Russia thanks to its low local production costs). Sales across the company should benefit from a refresh of the mid-range models, while margins should be helped by moves to manufacture more cars on a common platform.
Renault shares are up 17 per cent in the past year, although most of that came on Thursday. Its enterprise value is 9 times earnings before interest, tax, depreciation and amortisation, in line with local rival Peugeot.
But Renault is a bumpy ride, and not for the faint-hearted.
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