Executives: Thierry Huon - Investor Relations Clotilde Delbos - Executive Vice President and Chief Financial Officer Thierry Koskas - Head of Sales of

Marketing
Analysts: Charles Winston - Redburn Partners LLP Dominic O'Brien - Exane BNP Paribas Thomas Besson - Kepler Cheuvreux Gaetan Toulemonde - Deutsche Bank Jose Asumendi - JPMorgan Stephen Reitman - Societe

Generale
Operator: Ladies and gentlemen, welcome to the Third Quarter Financial Results Conference of Groupe Renault. I’d like now to hand over to Mr. Thierry Huon. Sir, please go ahead.

Thierry Huon: Good evening, everybody, and thank you for joining this call, which is broadcast live and available in replay versions on our website.

Presentation slides and press release for this call are all available on the finance sections of our website. I would like to point out the disclaimer on Slide 2 of this pack regarding the information contained within this document and, in particular, about forward-looking statements. I invite all participants to read this. Today's call is scheduled to last 45 minutes. As usual, we have two speakers this evening; Thierry Koskas, EVP, In-charge of Sales and Marketing, and Clotilde Delbos, EVP and CFO of the Group.

Their presentations will last about 15 minutes and will be followed by Q&A session. If you don’t have the time to take all the questions during the sessions, [Martin Nicola], and myself will be available after the call for answering the questions. Without further ado, I will hand over to Clotilde for few opening remarks.

Clotilde Delbos: Thank you, Thierry. Good evening, everybody.

Before reviewing our Q3 commercial result with Thierry in a minute, I would like to highlight the key takeaways from the third quarter. We are pleased to see the ongoing recovery in key emerging markets like Brazil and Russia. Both are doing better than expected and contributed to the strong revenues reported today. The Russian market recovery is also accelerating the AVTOVAZ turnaround, which is well on track if not ahead of our expectations. In this quarter, we also booked strong revenues coming from our business with partners, particularly thanks to the ramp-up of Nissan Micra production and the positive momentum of our CKD business in Iran and China.

In terms of risk, for the rest of the year, Forex impact is the main uncertainty as volatility remains high. As you will see in the revenue variance analysis this item turned negative this quarter. On the other hand, the main opportunities should be on the volume side, especially in emerging markets. As you could see in our press release, we have raised our estimates for some markets. Given the overall context, we are confirming our guidance for the full-year.

I will now pass the call over to Thierry, who will review our quarterly commercial performance.

Thierry Koskas: Thank you, Clotilde. I will now present the commercial results for the third quarter of 2017. So let's start with – look at the evolutions of the market. Worldwide, the TIV grew by 3.4% in Q3.

In Europe, the evolution remains positive plus 1.4%, with key markets well oriented like France, Spain or Italy and negative impact of the UK markets down by 8.1%. Outside Europe, we should highlight the significant growth rates in two key markets of Renault, Russia plus 17.7% and Brazil plus 14.6%. Iran, Eurasia progressing first plus 18.5% as well as India plus 13.7%, Algeria is still down due to restrictions on imports. Let’s now move to Group sales. So in Q3 the Group sold 866,000 units, it will growth of 9.4% versus Q3 2016 in line with our growth rate in the first half of the year and if we look at some details per region.

In Europe, our sales grew by 4.9% outpacing TIV. The Group gain 0.3 points of market share. Sales outside Europe still our growth as they increase by 13.5%. So if you comments per region, in Africa, Middle-East, India, our sales are almost stable with significant growth in Morocco and Iran, burned the other side drop in Algeria due to market limitations and there is a slight decrease in India before the launch of Captur that is due next month. In Eurasia, sales are rid by 24% in a dynamic market.

The Group gains more than 1 point market share in Russia and more than 3 points in Turkey. In America the Group also outpaces the market with an outstanding performance in Brazil where Kwid was recently launched in this country. The Group progresses in market share by 0.7 points. Finally in Asia, sales are up by 21%, sales more than doubled in China versus last year. Let's have a look quickly at the ranking of our market in terms of sales.

In the next slide, my first comment here is that the weight of sales outside Europe continues to grow reaching 54%, up 2 points versus Q3 last year. In terms of ranking per country, we can see that six countries out of our top 10 are none European countries and the Group gains market share in six markets out of 10. Before I handed over to Clotilde, I’ll finish with some highlights on the recently launched models. So firstly, Scenic is yet to-date, number one, C-segment MPV in France. Number three in Europe, in most countries it was launched during Q3.

So this was not reflecting the full-year potential of this model and indeed Scenic was number one in each segment in the month of September. Koleos is enjoying a good start Europe above our expectation; the model is where received and completes our existing offering high-end segments. Regarding sales outside Europe, Captur is doing well both in Russia and in Latin America. Kwid is off to a very promising start in Brazil, where our sales started in September and during this month Kwid accounted for more than a third of its segment. And finally, ZOE maintains strong leadership in EV segment in Europe since we launched the 400 kilometer version, customer orders have increased by 72%.

I will now hand over to Clotilde Delbos who will present Q3 revenue and outlook.

Clotilde Delbos: Thank you, Thierry. I will start this presentation with the change in third quarter revenues compared to last year on Slide 11. As you can see Group revenues increased 15.9% to €12,218 million in the quarter. This includes the contribution of AVTOVAZ which was consolidated at equity in Q3 2016.

The contribution from the automotive division excluding AVTOVAZ increased 9.9% to almost €11 billion when AVTOVAZ contributed for €634 million in the quarter. The contribution from sales financing was up 9.5% at €610 million. I will begin the analysis with the review of the automotive division on Slide 12. From the left hand side, the first item, volume accounted for 2.7 points. This positive impact is smaller than the increase in registration due primarily to the fact that CKDs notably in Iran and China included in registration are not captured in this volume effect.

In addition, the change in inventory had a negative effect of about 2 points on this item. Last but not least, do not forget that our new car business is not a 100% of automotive revenues. Next item, geographic mix had a slight positive impact of 0.1 points. The product mix effect was positive in Q3 at 1 point with the start of Koleos and the ramp up of Scenic in Europe. The price effect was positive by 1.1 points, but lower than the 2.3 points recorded in H1.

As anticipated, the significant impact of last year price increases in emerging markets has clearly faded away. We increased prices this summer in some countries, but on the limited scale compared to last year. In addition, we are now more than a year after the launch of some of key models such as Mégane and Talisman families. Therefore, we are not benefiting anymore from the carryover impact of enrichment price to the customer at the time of the model renewal. The sales to partners item was again positive in the quarter at 4.8 points reflecting the ramp-up of Nissan Micra production and the ongoing momentum of CKD sales in Iran and China.

We benefited as well this quarter from a positive impact of the Nissan Rogue produced in South Korea as the third quarter of 2016 was a low base due to a model year change at that time. The next item is foreign exchange. It showed a negative impact of 2.4 points. This is mainly explained by a weakening of most currencies against the euro, and I would highlight particularly the Argentinean peso, the Turkish lira, the Korean won, but as well the U.S. dollar and the British pound.

The last item others impacted positively by 2.6 points mainly explained by the robust performance of used vehicles and spare parts activities, but also from the accounting impact of buybacks adjustments, R&D invoice to partners was also a positive contributor. If I now turn to Slide 13, you have our inventories situation. Globally our stock went up a bit, but since our registration grew faster in number of days of business, we saw a decline from 76 days to 71 days. As usual, we have a de-stocking at independent dealers. Independent dealers stocks stood at 333,000 units versus 410,000 units at the end of June.

At the same time, Group inventory increased by 68,000 units. On a forward-looking basis, our inventory level is below 60 days. I will now move on to Slide 14 and comment RCIs commercial performance. In terms of activity during the quarter, the number of new contract written by RCI bank increased by 14% versus the same period in 2016. Thanks to strong sales momentum, higher penetration rate on new car, and growing used car activity.

New financing reached €5 billion, a 14.8% increase in line with the trend in new contract. Before moving on to the Q&A session, I will turn to the last Slide number 15, which gives you our outlook for 2017. As I mentioned in my prior remarks, we confirm our guidance for the full-year 2017, which states increased Group revenues beyond the impact of AVTOVAZ at constant exchange rates, improved Group operating margin in euros generated a positive automotive operational free cash flow. This concludes our presentation. Thierry and I will now take your questions.

And so, I will hand over the call to the conference operator. Thank you for your attention.

Operator: Thank you. [Operator Instructions] We have a question from Charles Winston from Redburn. Please go ahead.

Charles Winston: Hi, good evening. It’s Charles from Redburn. Thanks for taking my questions. Throughout these presentations we were left with the impression that the volume contribution was perhaps understated. You talked about an inventory impact.

You talked about forward-looking inventories being less than 60 days. Should we expect that to reverse in the fourth quarter? In other words, we can also my view is to what registrations and consolidated volumes are going to do. Should we be then boosting that by say 2%, 3% in the fourth quarter to [indiscernible] impact? That’s question one. Question two, just in terms of sustainable pricing, you’ve highlighted pricing were down, you very much predicted it. But what is the sustainable level? Can you remain in the north of 1% level without any FX gain or are we likely to drift back to zero.

And I’m sorry, just very quickly, can you help guide us on the fourth quarter FX impact from revenue, it is a bit all over the place. I got it wrong. If you could for any help account what rise thought to be useful? Thank you.

Clotilde Delbos: Yes. Sure.

There is a lot of question here. So that's why I was gathering my thought in order not to forget any of your questions. On the volume impact, where we clearly don't see any specific drop in our volume per se. Maybe Thierry can first say a word on the volume itself and then we'll look back to revenues.

Thierry Koskas: Yes.

On the volume side, we plan for Q4 to continue to grow at reason that is comparable to what we had year-to-date for two reasons. First of all, in Europe, we've to their full lineup with especially the effect of Scenic that we just had at the very end of the year. So this will have positive impact. And outside Europe, on top of the launch of some models, like Kwid in Brazil, as we showed, some markets are quite well oriented; the case is especially of Russia or Brazil.

Clotilde Delbos: So to add some comments on the volume impact, usually we don't have – I don't see such a big de-stocking impact versus where we are at the end of September in the last quarter.

There should be, again, as I said less mismatch between registration and invoices in the last quarter. So you have the volume trend and you should not take into account such a negative gap between registration and invoices. On the pricing front, I think, in terms of offsetting FX impact, so first maybe on the FX. You see that the FX has turned negative in this quarter in terms of sales. And for the last quarter, it's very difficult to predict by nature.

FX is extremely volatile, but you can note that it is one of the risk, it is de-risks that I did mentioned for the last quarter. So, now how about our ability to price FX in emerging countries. First, you always have a time lag. So we clearly see in Q3 that we are able to price a lot, so maybe that could be a little better in the last quarter, but we are already in many countries, one of the highest priced, if you look at our TPV analysis versus competitors. So our ability to continue to increase prices is being reduced in the future.

So I think this is what I can say on pricing because if you see on the rest, we keep our policy to be in average at the basket or slightly above in all country. So it will depend also on the competitors’ behavior I would say on the market. So globally, I guess this answers most of your question, because it brings what you want in terms of revenue on the volume and the pricing.

Charles Winston: Thank you very much.

Operator: Thank you.

Our next question is from Dominic O'Brien from Exane. Please go ahead. Dominic O'Brien: Hi there. Thanks for taking my questions. And just firstly one question on Russia – sorry, two questions on Russia.

And we saw some quite impressive results yesterday from VAZ, and particularly is profit in the third quarter. So I was just wondering, first of all, are there any one-offs is that Q3 profit numbers for VAZ? And then secondly, can you confirm that you’re seeing the same in Renault’s core business in Russia i.e., the Renault ex-VAZ. And secondly just on the sales to partners, can I just confirm, is the Nissan Micra now at full volume in Europe? And it’s just from the registrations date, that we had I know that China, Iran and the Nissan Rogue were contributors, but it didn't look like whether it would be that bigger contributors, what we've seen reported. So is there something else going on here, diesel declines less than you thought and just a bit of color there would be great? Thank you.

Clotilde Delbos: Okay.

Thanks for the question. Regarding Russia, no, there was no specific one-off in the results of the month of September. Obviously, they did benefit from correct, I would say rubble and this is something to be looked at for the last quarter. They also did benefit from incentives from the government for the sales of car. So that's basically – and they have made a lot of progress on their recovery plan.

So that's the reason for these good results. We're pretty happy because as I mentioned already several time, we're very well on track, if not ahead of our expectation on VAZ. One word maybe on Q4, even if you didn’t ask, obviously this will depend on the FX volatility. There are still some risk as Nicolas Maure did mention, I guess in the press release on raw material. So we're happy so far.

We will still have to see what Q4 is going to look like. No specific things to mention on Renault Russia. Same trends as you would have seen in terms of sales and we're also progressing pretty well on Renault Russia. On Micra, my understanding is that we're still in a rapid pace and there will be some additional production at least it is planned, obviously it will depend on Nissan performance on the market, but Micra is still not yet on the full production mode for Q3. On diesel, I'm not sure I completely got your question.

But you can see on the market that it is starting to be quite complicated on diesel. Maybe, Thierry, you want to say some word on the markets first?

Thierry Koskas: Yes, what we can see year-to-date 2017 compared to 2016 in the PC market, the weight of diesel lowered by around 5 points and we completely – from Renault side, we completely follow this evolution by obviously adopting our offer to the requirements of the customer. Dominic O'Brien: Okay. Thank you very much.

Operator: Our next question is from Thomas Besson from Kepler Cheuvreux.

Please go ahead.

Thomas Besson: Thank you, hi. Thomas Besson. I have two questions. First to come back on the emerging market dynamics that you raise in that Q3 statement.

If I understand correctly, Europe is doing the way you are thinking and you continue to gain share, but your key emerging markets are doing better. So overall, you are in the better environment than you were thinking before. Is it [indiscernible] and therefore you are logically more confident on your earnings looking forward for 2017 or you put the Forex risk certainly a bit to offset the gains in emerging market dynamic?

Thierry Koskas: On the sales side indeed in Europe, we continue to gain market share, year-to-date we are 0.2 points above last year, so we continue to gain market share. Thanks for the full renewal of our lineup. And yes, there is outside Europe, we see positive momentum in some markets that are key for the Group or where we make significant market share.

That's the case you have seen in Russia, that’s the case in Brazil, in Argentina as well. So it seen as a little opportunity and that's why we have reviewed the outlook of this TIV’s up compared to what we were saying at the end of H1.

Clotilde Delbos: Thomas and to go on your question, obviously as you know, this is not an earnings call. That being said, today I don't see any reason to change what I told you at the end of June. Yes, there are some risks as we mentioned on Forex volatility and raw material, but there are some opportunities especially as you rightly mentioned on the emerging markets volume potential that we have seen.

So there is no major reason to change. There is no new elements versus what we told you at the end of H1. We are committed to do better than last year and we are clearly on the path to do so.

Thomas Besson: Okay. Very clear.

I am sorry, I'm asking another question which is not exactly appropriate for the call, but coming back to Russia and the questions from Dominic earlier. So you are already at 3.7 for AVTOVAZ with volumes that are identical to Q2 and still very low, and the Renault car business is doing well. What do you think is potential for the business if you assume that the Russian market gets back to – closer to 2.5 billion units in 2020? Is it that above 10% as you aware for the car rental business or is it even higher?

Clotilde Delbos: I think, Thomas, we answered already this question during the MTP presentation on October 6. Clearly Russia has a lot of potential. At the end of the plan, it's going to be our first market and we don't see any reason except maybe for currency assumption, but if the market goes back to where it was before there is no reason why it cannot be one of our major profitable pool.

There's no change versus what we said. There is no change versus what we said two weeks ago. But obviously this is that – in a few years, this is not for now yet unfortunately.

Thomas Besson: Sure. But we already see that with no volumes, you’re already up [indiscernible] different margin, so I find that’s really encouraging.

Thank you.

Clotilde Delbos: Thank you.

Operator: Thank you. We have a next question from Gaetan Toulemonde from Deutsche Bank. Please go ahead.

Gaetan Toulemonde: Yes. Good evening. I am crossing my finger on the question I’m going to raise. Regarding raw material, I remember at the end of H1, you mentioned that you are guiding for something that around 400 million headwind this year, is that the number you count firm, it’s a little bit better, it’s a little bit worse. So question on the FX, in the past to kind of rule of thumb you gave us is approximately one-third of the revenues falling through.

Is it something you still seek today? That’s my first question and I have got a second one afterwards.

Clotilde Delbos: Okay. So on raw material, yes, there's no reason again to change what we told you during the H1 results, so we said around €400 million headwind. Of course, it really depends on the assumption you take on the raw material, but flat still being the main component as we have mostly semi annual or annual contracts to supplier. This is relatively predictable item, so yes, 400 – it might be slightly more, but not anything major.

On the FX, it really depend on the basket of currency. Unfortunately, have you have seen in the first quarter, we had – in the first half; we had a currency of basket which was quite deferrable because we had a positive impact on the turnover and a negative impact on the P&L. These have slightly changed. We now have a negative impact on the turnover. The basket has changed.

And then we should go back to something closer to what we sold before on the currency of the emerging markets, everything will depend though on the euro to dollar and the euro to one and currency exchange I would say. For modeling purposes, I think that you can take globally an effect on that – if it stays as it is today an effect that could be in the magnitude of what you saw in the first half despite the change on the turnover impact.

Gaetan Toulemonde: Okay. That's clear. So it’s a little bit better than I thought.

Second question on pricing environment in Europe, is it – I remember in the first half you started to mention some kind of deterioration, not only share, but some of the competitors. How would you see the situation quite, it will be speaking as a little bit worse, stabilizing or a little bit better in Europe?

Thierry Koskas: Okay, so you’re right at H1 result presentation, we have mentioned the drift already increase of tactical channels in the main European markets, which means that the weights in the total TIV was increasing. At the end of September, we see this trend confirmed, no further deterioration, but still in the main markets we can see that the weight of tactical channel, which is short-term rental and demo, is slightly increasing, except in Germany, where the weight of these channels is not moving. Second point is, in this context, the Renault Group has healthy behavior as our performance is increasing in the healthy channels fleet and retail more done on the tactical channels. But yes, we see this increase of the weight of the tactical channels.

In terms of price positioning, we have the same pitcher as what we had the end of June. As you know we compare to the basket of our main competitors and we are today in terms of transaction price above the average of the market.

Gaetan Toulemonde: Okay. Thank you very much.

Operator: Okay.

Thank you. [Operator Instructions] Our next question is from Jose Asumendi from JPMorgan. Please go ahead.

Jose Asumendi: Thank you. Just a couple of questions please.

Thierry, maybe just one on diesel, can you just remind us please, what is your share of gasoline versus diesel in the French car market? What is the year-on-year change hopefully and how far can we increase the share of gasoline technically within the Group the share of diesel continues to decline in 2018? And also if you could please comment on residual values for diesel vehicles what was you are taking general for the market or specifically for Renault? And then Clotilde, can you just help us a little bit. I'm trying to sort of square a little bit the earnings contribution from the volume growth and then from the sales to partners and the other line? Can you give us a bit of steer into the year-end, how we should we think about that – from volume or from sales to partners of your line? Thank you very much.

Thierry Koskas: So on this you're asking about the share of diesel in the market. Am I right? On the share of petrol, it’s the same. What we observe is in the PC market in Europe, 49.3% of the global market is petrol and for Renault it's 49.1%.

So it’s exactly the same. And as I said it’s a shift of four to five points versus same period last year. So I would say we completely follow the market trend.

Jose Asumendi: And residual values from – these of the [indiscernible] what have you seen in general?

Thierry Koskas: Yes. On residual value, overall what we see is slight erosion of diesel residual value, but at the same time an increase of residual values of petrol cost.

So basically to get that we are traditionally between petrol and diesel is narrowing down. And even in some countries, we can observe that petrol residual value is now slightly above diesel, that’s for example the case in Spain. I’m talking about the B-segment where the share of petrol and diesel are quite significant, so we can have good comparison between petrol and diesel, but basically slight erosion on diesel and narrowing the gap between diesel and petrol residual value.

Jose Asumendi: Thank you.

Clotilde Delbos: On the volume flow through, I guess all I can say is it's very difficult to predict exactly.

I already commented on the gap between registration and invoices, so I'm not going to say that again. But all I can tell you is it; it really depends on the mix of countries. Depending on which country is going faster than the other, it does ever flow through the odd volume or through sales to partner. If we are increasing in Russia, a part is going to go through volume and a part with the CKD that we're selling to VAZ would go, well actually it's criminated now into some point, but it could go in sales to partner. Same with Iran and China, if the growth is in Iran and China it's going to go through the sales to partner and not through volume.

So it's very difficult to give you a very definite split between the two because at the end of the day what counts for us is the total. But so that's what I can say. I can see another word also on sales to partner. Obviously, don't forget that our sales in Iran and China started to pick up in the Q4 last year. So our comfort to base it's going to be tougher in Q4 than what it was in the previous quarters.

On the other hand and also a same thing on Rogue, where we had an easy comparison in this quarter and it's going to be tougher in the Q4, but globally it's very difficult to predict what is going to fall into volume and what is going to fall into sales to partner.

Jose Asumendi: Thank you.

Operator: Our next question is from Stephen Reitman from Societe Generale. Please go ahead.

Stephen Reitman: Yes.

Good afternoon. Thank you. A question following on from Gaetan about pricing, and particularly the impact of the eco measures that are been produced by car makers. And how impactful do you think these eco measures are being in terms of supporting sales? I am looking particular at some of the deals that are being offered in France, and you can get at go for [103 years] a month with the €1000 down on a three-year prior contract. That seems to be very low, so I am just wondering that if you trade in a [€1 to €4] diesel car.

So I am just wondering how many people are trading in these vehicles and getting these kinds of deals which looked very attractive of the pace of it and how much impacting the middle market? Thank you.

Thierry Koskas: Yes. On this point, as you well know the scrappage schemes started in Germany as it global market trend in Germany we offered similar comparable offers. We see there are some difference between OEM and so on. In France, we understand that yes the competitor you mentioned launched similar action, but we do not intend to follow the same scheme to be very clear.

Stephen Reitman: And then just what you think – and what you think is happening in terms of are you seeing just in terms of the take-up of [indiscernible] being traded in. How successful is this already?

Thierry Koskas: We don't have any comments to we are not going to give figures. Yes, there is of you see some interest in this scheme or you see not everybody has the type of cost that can be trading on this type of scheme. But yes, we noticed especially in Germany a significant customer interest on this scheme, but we don’t have or we don’t comment under the take up rates.

Stephen Reitman: Thank you.

End of Q&

A
Operator: Okay. Thank you. We have enough for the questions.

Thierry Koskas: Okay, if there is – no more questions. Thank you for being on the call.

I know it is very busy day for your guys and that you have value coming in few minutes, but if you have further question, please feel free to call us whenever you want. Bye-bye.

Operator: Thank you. Ladies and gentlemen, this concludes the conference call. Thank you all for your participation.

You may now disconnect.