Renault SA posted a drop of 19 percent in operating profit in the first half of the year as raw material costs and supply problems compounded the weak European demand for aging models like the Clio compact. Specifically, operating profit excluding one-time items declined from 780 million euros to 630 million euros ($904 million), the company revealed in a statement on Thursday.
Analysts had forecasted a profit of 595 million euros, based on the average of nine estimates as surveyed by Bloomberg. Revenue increased 7.3 percent to 21.1 billion euros.
CEO Carlos Ghosn shared that the financial results were affected by external events such as the supply constraints and increasing costs of raw materials. He added that the supply problems will subside during the second half of the year.
The company, which hasn’t had new-model launches recently, is losing European business to rivals General Motors Co and Volkswagen AG. The company is due to unveil a revamped Twingo mini at the Frankfurt auto show in September and an all-new Clio next year.
The March earthquake in Japan also erased 150 million euros from first-half earnings, according to Renault. The company has blamed supply problems, some of which were due to the quake, for falling sales of vehicle models like the Dacia Duster four-by-four, as delivery times accumulate.
Moreover, the company’s share of car registrations in Europe dropped to 9.5 percent in the first half from 10.5 percent in the same period last year, based on the data from the Brussels-based European Automobile Manufacturers' Association.
Chief Financial Officer Dominique Thormann stated that the environment is worse than they had expected. The CFO also revealed that their supply chain was already “under strain” when the year started.