AvtoVAZ returns to profit

Article by Christian A., on October 7, 2012

Even as the vehicle sales of Russian carmaker AvtoVAZ fell, it was still able to post a net profit of 700 million rubles ($23 million) in the first half of the year, compared with a loss of 500 million-ruble in the same period last year. In the first six months of the year, AvtoVAZ sold 250,732 vehicles, a 14% drop. The automaker produces Lada cars, which are the top-selling cars in Russia.

Lada’s sales fell due to the termination of a state-backed car scrappage program intended to support local carmakers. The company, which is scheduled to be taken over by Renault and Nissan by 2014, increased prices on July 1. It expects sales in Russia to drop by about 9% this year to 525,000-530,000 vehicles.

PricewaterhouseCoopers anticipates that the total market in Russia will increase by 4% this year to approximately 2.6 million vehicles and Russia is on course to become the largest car market in Europe by the middle of the decade as increasing incomes and a rise in consumer spending drives demand. In addition, AvtoVAZ said last Friday that there’s a 23% increase in its earnings for the first-half before interest, taxation, depreciation and amortization to 5.4 billion rubles.

Mikhail Pak, an Aton analyst, said that profits were raised by unspecified asset sales estimated to be valued at 2.5 billion rubles. He said that estimates show that if no sale was recorded, a loss will be recorded.

When a non-cash gain from extending the repayment period on its debt is included, AvtoVAZ’s net profit would have more than quadrupled in the half-year to 27.4 billion rubles. AvtoVAZ said that the increase from discounting the price of future debt payments added 26.7 billion rubles to the overall net profit outcome.

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