Dow Jones Newswires (Paris) - French automotive group Renault SA (RNO.FR) said Tuesday it anticipates some disruption to its production in the summer due to supply-chain bottlenecks stemming from the Japanese disasters in March, but reaffirmed its earnings guidance for 2011 due to more robust sales than it expected in the first three months of the year.
Renault reported a 15% rise in revenue in the first quarter from a year before, reflecting more buoyant international automobile markets outside Europe that led to a 5.8% increase in its world-wide vehicle deliveries. Revenue for the three-month period climbed to EUR10.43 billion, above an average estimate of EUR9.70 billion from a panel of six analysts polled by Dow Jones Newswires.
Renault said supply disruptions caused by a temporary shortage of parts from Japanese suppliers could lead to hiccups in its production runs later in the year. "With the supply of certain parts already under strain in the first quarter, the tsunami in Japan has increased the pressure on the global automotive industry's logistics chain and could result in slower production in the coming months," it said.
However, Renault went on to say in its statement that "at this stage, the group's targets for full-year 2011 are unaffected by the expected temporary impact of this slowdown."
One of the main factors that is forcing some auto makers to slow down production is the lack of key components such as electronic engine-management systems. Chief Financial Officer Dominique Thormann told analysts that, thanks to efforts to find alternative sourcing for critical parts, "we don't see any production disruption kicking in until the very end of the second quarter or even the start of the third quarter, with the situation returning to normal by the fourth quarter."
"One of the biggest impacts on production looks to be limited to the summer months," he said, and that may lead the company "to change summer work patterns and shifts at certain sites across the group in order to align manufacturing with the availability of components coming from certain suppliers."
With the sales performance in the first quarter ahead of plan, and taking into account likely production disruptions later this year, he said, Renault is expecting to post higher sales volumes and revenue than in 2010, with global industry volumes increasing by less than the 6% that the company had expected earlier this year.
Without the Japanese tsunami effect, he added, Renault would have been reassessing its guidance for the full year for both volume sales and cash flow.
Renault reaffirmed its earlier guidance for 2011 that it is targeting operational free cash flow from its automotive operations of over EUR500 million with a ratio of capital expenditure and research and development spending close to 9% of revenue.
Revenue at the automotive division rose 15%, driven by the strong volume sales, increased demand for higher-value vehicles and a EUR114 million boost from exchange-rate fluctuations, notably that of the Brazilian real.
Its shares Tuesday ended the day up EUR1.05, or 2.7%, at EUR39.44. The stock has shed 20% in value in the past three months.
