Renault posted a 25-percent surge in earnings before interest, taxes and one-time items in the first half of 2014 to EUR729 million ($979 million) as cost-cutting measures offset currency headwinds and increasing inventories. The carmaker saw a large jump in net income for the first six months of 2014 to EUR801 million from just EUR97 million in the same period in 2013.
Last year’s first-half result was hurt by a EUR511 million write-down on its Iran business. Renault also saw its automotive operating profit jump from EUR211 in the first half of 2013 to EUR348 million in the same period this year.
Renault likewise managed to hike its operating margin from 2.9 percent to 3.7 percent of revenue. Revenues’ however, dropped 3 percent to EUR19.82 billion, no thanks to currency effects.
Automotive generated EUR18.7 million of revenue, reflecting a 3-percent drop. Renault said that despite an increase in registrations, the volume effect was negative due to an adjustment in inventories of independent dealers.
The French carmaker reiterated its full-year target of higher operating profit as supported by higher sales and vehicle deliveries. According to Renault, the recovery of the auto market in Europe was stronger than 2 percent to 3 percent it had forecast. It is now expecting the Europe auto market to grow.
Chief Financial Officer Dominique Thormann remarked that the significant increase in group profitability stems from a “very firm cost control."
The carmaker particularly saved around EUR412 million in cost, including EUR200 million gains from cuts in purchasing and EUR190 million from logistics, research and development.
Renault is aiming to reach a goal of a 5-percent profit margin by 2016 by cutting thousands of jobs, mostly in its home country France. In 2013, Renault trimmed its local workforce by nearly 5,600 jobs, slashing the figure to 48,550 workers as of Dec. 31, 2014.