• Amid sluggish trading conditions, Renault grew revenues by 3.8% to $61,046 million on the success of its range and its strategy of international expansion.
• Operating margin rose sharply in the second half-year, as expected. The group also benefited from an improvement in Nissan's earnings. Net income rose 26.8% relative to 2002.
• Renault continued to strengthen its financial structure by increasing shareholders' equity and paying down debt.

Amid sluggish trading conditions, Renault improved its performance in second-half 2003, in line with guidance, and stabilized its share of the world market at 4.1%. The group sold 2.39 million vehicles during the year, down a slight 0.7%.

In Europe, where the automobile market contracted by 1.6%, Renault kept its position as the leading brand for passenger cars and light commercial vehicles, with market shares of 10.6% and 15.1%, respectively.

The group continued to expand outside Western Europe, with sales growth of 9%. That performance was achieved on the back of buoyant demand in Central and Eastern Europe, and Russia; a pick-up in the Turkish market (127%); and an 18.8% rise in sales at Dacia. In Korea, the market fell nearly 18%, but Renault Samsung Motors staged a resilient performance and once again grew its share of the passenger car market, to 10.8%.

On a consistent basis and including the impact of currencies, revenues grew 3.8% year-on-year to $61,046 million.

The Automobile Division contributed $57,809 million to group revenues, compared with $55,757 million in 2002, a 3.7% rise. Despite negative currencies, revenues grew thanks to an improvement in the mix and prices of new vehicles in Europe. One of the main factors here was the success of the entire Mégane II range (3-door and 5-door hatchbacks, 4-door saloon, estate and coupe-cabriolet, Scénic II (launched in June 2003)) as well as Espace IV. Other elements contributing to the upturn were steady growth in diesel sales, a stronger commercial performance in international markets, an increase in spare parts activity and a rise in sales of components to other companies, particularly Nissan.

The Sales Financing Division reported a 5.1% year-on-year rise in its revenue contribution to $3,237 million, measured on a consistent basis

Profitability driven by successful new models

Reflecting the success of new models, operating margin increased to 4.3% in the second half, compared with 3.2% in the first, giving a total for the year of $2,281 million, or 3.7% of revenues.

Despite adverse economic conditions in 2003, with a contraction in the French market and a stronger euro, the Automobile Division held steady and, in the second half, was boosted by billings on new versions of Mégane. The contribution from international markets remained stable, as sales in Turkey rallied and losses in Mercosur leveled off. This offset the lower contribution from Renault Samsung, hit by falling sales volumes and the depreciation of Korea's currency, the won. Also contributing to this performance, general expenses and R&D expenses were kept in check, while purchasing and production costs continued to decline. The second three-year cost-cutting programme was completed this year, in line with its target of $2.8 billion.

The Sales Financing Division reported operating margin of $597 million, or 18.4% of its revenues, compared with 15.6% the previous year. This reflects the division's strong marketplace momentum and tight cost control.

Other operating income and expenses showed a charge of $273 million for 2003, compared with $432 million in 2002.

The income side includes a $47 million capital gain on the disposal of equity interests, including $16 million from the sale of a 51% stake in Renault Agriculture. It also includes a profit of $182 million from property sales. The expense side includes $260 million of restructuring provisions, mainly for early retirement plans.

As a result, operating income for the year was $2,007 million, on a level with 2002's figure of $1,979 million.

The balance on the financing account in 2003 shows an expense of $115 million, an improvement of $32 million relative to 2002.

Renault's share in the net income of companies accounted for by the equity method rose sharply to $3,025 million, compared with $2,165 million in 2002. Renault benefited from strong earnings growth at Nissan, which contributed $2,773 million. The equity-accounted contribution from AB Volvo was a positive $284 million compared with $115 million in 2002.

Group pre-tax income amounted to $4,917 million, compared with $3,997 million in 2002.

After tax and minorities, Renault had net income of $4,034 million, up 26.8% on 2002.

Earnings per share works out to $15.16, compared with $12.25 in 2002.

The group continues to strengthen the financial structure

Shareholders' equity increased by $2,868 million to $22,109 million at December 31, 2003. The net financial indebtedness of the Automobile Division was reduced by $1,215 million relative to end-2002, reaching $2,843 million at December 31, 2003. This is attributable partly to healthy operating conditions, with cash flow remaining level year-on-year at $5,124 million, and partly to a further $388 million reduction in the working capital requirement. Cash from operations comfortably financed investments in property, plant and equipment, and intangibles, which amounted to $4,120 million. By pursuing a more selective investment policy, the Automobile Division was able to reduce capital expenditure (excluding the impact of IAS 38 and exceptional property disposals) to 6.1% of revenues, compared with 6.8% in 2002.

With a combination of falling debt and the increase in shareholders' equity, leverage (i.e. the ratio of debt to equity) improved by 8.2 percentage points, contracting from 21.1% of shareholders' equity at end-2002 to 12.9% at end-2003.

On February 24, 2004 the Board of Directors will approve the financial statements presented on February 10. It will ask the Annual General Meeting of Shareholders on April 30, 2004 to confirm a dividend of $2.28 per share, not including the dividend tax credit.

Outlook for 2004

Renault expects the automobile market in 2004 to edge upwards in Europe and increase slightly in the main countries in which the group operates outside Europe.

Amid sluggish markets, Renault will benefit from a Mégane family at full strength as well as from heightened competitiveness, primarily as a result of cooperative ventures within the Alliance. In addition, Renault will pursue its international development and will be looking to grow volumes outside Western Europe.

Overall, assuming no significant changes in major exchange rates compared to the current situation, the group has set itself the objective of achieving operating margin of around 4.5% of revenues in 2004. Renault also anticipates a further increase in net earnings.

Note on data presented on a consistent basis
Main changes in accounting methods and scope of consolidation: deconsolidation of Renault Agriculture with effect from April 30, 2003; Sofasa fully consolidated as from Jan. 1, 2003.