Renault profits drop but by less than expected

28th July 2006, Comments 0 comments

PARIS, July 27, 2006 (AFP) - The French automaker Renault posted Thursday an expected drop in first-half net profit owing to a lack of new models and rising raw materials prices, but confirmed full-year sales and profit targets.

PARIS, July 27, 2006 (AFP) - The French automaker Renault posted Thursday an expected drop in first-half net profit owing to a lack of new models and rising raw materials prices, but confirmed full-year sales and profit targets.

Renault shares rose sharply in late trades after the French CFDT trade union leaked the group's operating margin figure ahead of the full results, which were released after the Paris stock market closed.

The automaker's first-half net profit dropped by 25 percent to EUR 1.62 billion, while operating profit plunged by 46.2 percent to EUR 649 million.

The figures nonetheless surprised analysts, who had only expected net profit of between EUR 1.278-1.39 billion and operating profit in the range of EUR 560-590 million.

Sales were stable, gaining 0.4 percent to EUR 21.547 billion.

The CFDT had indicated "slight growth" in the sales figure, without providing details.

But it detailed Renault's operating margin, which amounted to 2.7 percent of sales, exceeding expectations of 2.5 percent.

Renault shares shot up by 4.71 percent as a result, after showing a gain of 2.20 percent before the leak. The shares ended the day with a gain of 3.80 percent at EUR 84.75.

The group net profit included a strong contribution from Renault's Japanese partner Nissan, in which the French group holds a 44.4 percent stake, and the Swedish automaker Volvo, of which Renault owns 20 percent.

A decline in European sales and an unfavourable model mix as Renault's fleet ages was offset by growth outside Europe.

Renault stuck to its full-year guidance for both sales and operating profit but warned that raw materials costs were likely to rise by EUR 350 million during the period.

In February, Renault announced a three-year plan which promised 26 models between 2006 and 2009, including eight per year in 2007-09, with the aim of boosting annual vehicle sales by 800,000 units by 2009.

On Thursday, the group said it would launch eight new products in the second half of 2007, and given this rollout schedule, "earnings will mainly be driven by the cost-reduction program" announced earlier.

In 2008 and 2009, however, "earnings growth will gather momentum" with seven new models arriving in 2008 and nine in 2009, the company said.

Renault sees its operating margin at three percent in 2007 and 4.5 percent in 2008, and is targetting six percent in 2009.

The company announced a 264-million-euro reduction in debt, bringing the auto division's net debt down to EUR 1.988 billion on June 30 from EUR 2.252 billion on December 31, 2005.

Looking ahead, Renault said it would launch the phase-two Scenic model in September and phase-two Trafic and phase-three Master commercial vehicles in October.

Outside Europe, Renault is to release two versions of the Logan model made by its Romanian subsidiary Dacia for emerging markets: a station wagon and a light commercial vehicle.

"The development of the Logan program, backed up by dynamic sales at Renault Samsung, will sustain sales growth," the group said.

Renault took over the insolvent Korean Samsung auto company in 2000 to form Renault-Samsung.

Copyright AFP

Subject: French news

 

0 Comments To This Article