AvtoVAZ returned to profit in the first half with a net profit of $102 million

Article by Christian Andrei, on October 10, 2010

In the first half of the year, AvtoVAZ was able to become profitable once again with a net profit of 3.1 billion rubles ($102 million). The Russian carmaker attributes the revival to state assistance and the improvement in the market. Last Tuesday, AvtoVAZ, which makes Russia's top-selling Lada model at the town of Togliatti, said that it benefited from interest-free loans given by state-controlled Russian Technologies.

In addition, car sales had been climbing. From January to June of 2010, revenue grew to 62 billion rubles compared to 53.1 billion posted in the same period in 2009.

VTB analyst Vladimir Bespalov said that the situation is “improving” and that the “second half is likely to be better.” At this time last year, AvtoVAZ was on the brink of bankruptcy as car sales plummeted amid the global economic crisis.

The state eventually had to bail out the company and it had received support from 25% shareholder Renault; however, Bespalov said that the company still has a large debt on its hands.

Bespalov said AvtoVAZ has a net debt of more than $2 billion and it has “huge capital spending requirements” to fill. He also pointed out that AvtoVAZ will soon release its new models and the success of those models has yet to be seen.

In the first half of the year, AvtoVAZ costs rose by 26.3% as it stepped up production. With the help of a government-sponsored scrappage scheme, Russian car sales increased by 51% in August compared to the previous year. [via autonews - sub. required]

Topics: avtovaz, profit

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