Renault profits hit top gear

28th July 2004, Comments 0 comments

PARIS, July 28 (AFP) - Renault rammed profits into top gear in the first half, results showed on Wednesday, and the group raced ahead on the stock market where analysts noted that the drive was coming from the parent and not just from Japanese affiliate Nissan.

PARIS, July 28 (AFP) - Renault rammed profits into top gear in the first half, results showed on Wednesday, and the group raced ahead on the stock market where analysts noted that the drive was coming from the parent and not just from Japanese affiliate Nissan.

The "Megane" car model was the star performer. The results caught spectators in the stock market stadium unprepared and even took Renault itself by surprise.

Net profit rose by 28.5 percent to EUR 1.513 billion (USD 1.83 billion) and operating profit nearly tripled to EUR 1.205 billion.

The stock market was caught on the wrong foot but immediately revised upwards the company's capitalisation: the price of shares in the auto group was showing a gain of 5.39 percent to EUR 64.50 in early trading in Paris.

A trader at an independent stock broker here, who declined to be named, commented: "These are very good figures, excellent in fact, but not totally surprising because Peugeot had also published excellent figures and because Nissan is in very good shape.

"But the operating profit is really impressive because it is far higher than expected."

The group raised its target for operating margins, a key profit measure by about 25 percent to 5.5 percent of sales for the year from 4.5 percent at the beginning of the year.

But it said the European car market would expand by only 1.0-2.0 percent this year. On Tuesday its French rival Peugeot Citroen PSA reported a 21.6-percent drop in net profit in the first half but pleased the market with an operating margin of 3.7 percent.

Renault said that its worldwide vehicle sales rose by 6.5 percent to 1.306 million vehicles, led by the Megane family car, but also by strong sales of the "Espace" people-carrier, the pioneer of its segment in Europe.

Commercial vehicles also did well, and international sales had been strong, notably in Turkey.

Another factor was an increased proportion of sales of vehicles generating high profit margins, and cuts in purchasing and production costs.

The net profit figure was in line with forecasts by analysts but the operating outcome was far higher than they had expected.

The strong performance arose from good figures by Renault itself and not solely to performance by its Japanese partner Nissan. The contribution from Nissan rose by 9.9 percent to EUR 939 million.

Group sales rose by 11.6 percent to EUR 20.76 billion, and the operating margin was 6.1 percent from 3.2 percent in the same period of last year.

In the first half of last year net profit was EUR 1.177 billion and operating profit EUR 418 million.

Group chairman Louis Schweitzer said: "These are very good results which are significantly higher than we had expected and far higher than the market and analysts had expected."

He noted that "the profits rise was pulled by operating margins and sales by Renault itself which is an important factor for the (Renault-Nissan) alliance".

The strong trend of the first half should continue in the second half. And in the second half the group would begin to renew its model range with the launch of a small monospace or people carrier to be called the "Modus".

Although the rise of net profit would be boosted by nine months of profits from Nissan instead of six months in the first half, operating margin, at 4.8 percent, would not increase from the first-half figure owing to seasonal factors, he said.

Asked if Renault had reached a peak of performance in the first half, he said that he was "fairly sure that there is room for further progress".

Net debt for the auto activities had fallen by EUR 937 million to EUR 811 million on June 30. 

© AFP

Subject: French news

0 Comments To This Article