Renault logs 23% drop in first-half operating profit to EUR482 million

Article by Anita Panait, on July 28, 2012

Renault posted a 23-percent decline in earnings before interest, taxes and one-time items to EUR482 million ($592 million) in the first half of 2012 from EUR630 million in the same period in 2011. The company’s sales slightly dropped 0.8 percent to EUR20.9 billion. Renault's automotive unit, meanwhile, recorded a 35-percent dive in first-half profit to EUR87 million, as it consumed EUR200 million of cash.

This translates to only 0.4 percent in profit margin in the first half of 2012, compared with a 1.1 percent in the same period in 2011. Despite the decline, analysts commended Renault for its first-half results, given the dwindling demand for vehicles in Europe.

Analyst David Arnold of Credit Suisse said that it is very encouraging to see that the company managed to post a profit in the autos division during the tough six-month period.

Arnold, however, said that there is a little chance that Renault "can make up the delta" between its first-half results and a full-year goal of positive operating cash flow.

Sascha Gommel, an analyst at Commerzbank, described Renault’s first half performance as “good results,” while comparing it to Peugeot.

Local rival PSA/Peugeot-Citroen posted a first-half loss of EUR662 million at its auto division. Gommel quipped that Porsche’s still profitable automotive division should be perceived positively by the market.

Renault aims to beat its deliveries in 2011, while abandoning an earlier growth target of 3 percent to 4 percent. The French carmaker now expects the European market to shrink 6 percent to 7 percent in 2012, and the French market to fall by 10 percent to 11 percent.

According to the industry association ACEA, Renault posted a 17-percent decline in deliveries to 583,145 vehicles, logging the biggest first-half sales drop in Europe.

Renault posted a flat profit in 2011—with earnings before taxes, interest and one-time items dropping 0.7 percent to EUR1.09 billion ($1.42 billion) from EUR1.1 billion a year ago. This flat result came as European sales plummeted for a fourth year while price rivalry intensified.

According to Renault Chief Executive Officer Carlos, the French carmaker manage cope with the various crises it faced throughout the year. In 2011, Renault and PSA/Peugeot-Citroen implemented work stoppages to reduce inventory size in the face of uncertain market conditions. Renault expects the European market to contract by between 3 percent and 4 percent this year.

Renault saw its 2011 revenue jump 9.4 percent to EUR42.6 billion from EUR39 billion a year ago. Global deliveries at Renault surged by 3.6 percent in 2011 to a record 2.72 million light trucks as strong demand in Russia, Turkey and Latin America counteracted a weak market in Europe.

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