Renault profits plunge but shares rise as China targeted

French automaker Renault reported Thursday a two-thirds net profit plunge for 2013, blaming an embargo block on operations in Iran and restructuring charges. The group said that it would focus on developing activities in China and would not make a production foray into the US market. The Japanese subsidiary Nissan made a net contribution to the results of 1.4 billion euros. Renault, the second-biggest French group after struggling PSA Peugeot Citroen, said that net profit fell to 586 million euros ($799 million) from 1.75 billion euros in 2012. This was after a provision of 514 million euros for the suspension of business in Iran since the middle of last year. Another charge of 488 million euros reflected asset write-downs for various vehicle lines. The group also took a charge of 423 million euros linked to an agreement with trades unions in France to raise productivity signed early last year. However, the group reported an operating loss of 34 million euros, in contrast to a profit of 183 million euros in 2012, on the basis of a changed method for presenting the results. The results were better than the market had expected and Renault shares were showing a gain of 5.27 percent to 69.35 euros in early trading. The French CAC 40 index edged up 0.07 percent. The car division achieved an operating profit of 495 million euros and generated free cash of 827 million euros. Sales were about steady at 40.9 billion euros. The board said it intended to pay a dividend of 1.72 euros per share. For 2014, it hopes to increase the number of vehicles registered and the sales figure, on the basis of constant exchange rates, and to raise the outcome for operating margins. The group also presented its targets for the second part of its strategic plane called "Drive the change". It intends to achieve sales of 50 billion euros in 2017 and an operating margin exceeding 5.0 percent of sales. But the group has not succeeding in meetng all of its targets for the first part of the plan from 2011 to 2013. - Radar focused on China - It did better than expected in terms of free cash flow, a measure of how quickly money comes into the company before being used, achieving 2.5 billion euros. But it soon had to drop a target to sell 3.0 million vehicles in 2013 because of a crisis in the European auto market. The group had targeted an operating margin of 5.0 percent in 2013, but achieved only 3.0 percent. Chief executive Carlos Ghosn said that the company hoped eventually to sell 600,000 to 700,000 vehicles a year in China where it would begin to manufacture in two years' time. "Today, we are concentrating on China," he told a conference of analysts. In December, Renault signed a deal with Chinese state-controlled group Dongfeng for a joint venture and a factory which will produce 150,000 vehicles per year at first. Dongfeng is also widely expected to become involved in a tie-up with Peugeot. Ghosn said that China was now the biggest auto market in the world, but Renault was alone among the 10 biggest car makers in the world which did not assemble vehicles in the country. Renault did not intend to set up production in the United States where cars were selling well, he said. "The United States is not on our radar screen."