Renault boosts first-half profit, eyes China

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French car maker Renault saw its first-half profits soar to 1.2 billion euros despite losses caused by the earthquake in Japan and high raw materials costs, it said Thursday.

It said meanwhile it was seriously discussing how to expand its reach into the growing Chinese auto market.

Net profit rose 56 percent to 1.25 billion euros ($1.72 billion) on record sales that rose 7.3 percent to 21.1 billion euros, it said in an earnings statement.

The earthquake in March, which hit car major parts suppliers, cost Renault 150 million euros, it added.

"The financial results were impacted by external events, including supply constraints, which will subside in the second half, and a considerable increase in the cost of raw materials," said chief executive Carlos Ghosn.

He said in the statement the group maintained its outlook for operational free cash flow -- a key measure of profitability -- at more than 500 million euros this year.

"The supply constraints stemming from the Japanese tsunami had an unfavourable impact on the operating margin of automotive of an estimated 150 million euros in the first half," the statement said.

The company said it expected the consequences of the earthquake would cost it a further 50 million euros this year.

"Supply constraints are expected to subside gradually in the second half, enabling a strong recovery in production from September."

France's biggest auto group PSA Peugeot Citroen on Wednesday reported a first-half net profit rise of 5.0 percent but its outlook for the year disappointed the market and the shares fell.

Its net profit for the first half of 2011 rose to 806 million euros and current operating profit by 1.8 percent to 1.16 billion euros, it said.

Renault's shares rose by more than four percent Thursday morning on the Paris stock exchange, which was down by 0.5 percent overall.

"The results seem better than expected and better than PSA for the first half of the year, but above all the outlook seems more favourable," said Florent Couvreur, an analyst at CM-CIC Securities.

Earlier this month Renault reported that its first-half vehicle sales fell 7.4 percent in Europe but it expected record sales worldwide thanks to booming emerging markets.

It said it was hoping to sell more than 2.6 million vehicles, a record, over the whole of 2011, as its international sales improved.

Senior manager Carlos Tavares told reporters that Renault is looking to follow other European car makers and its Japanese partner Nissan in expanding its limited presence in China.

"Major discussions are underway" with a view to creating "a network of sales outlets which will open the way to a more strategic presence" there, he said.

© 2011 AFP

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