Renault SA said on Wednesday that its net profit rose 54% in the first half of 2005, citing one-time gains from asset sales and stronger contributions from Nissan Motor and Volvo AB, the Associated Press (AP) reported.
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Renault reportedly said operating profit before one-time items fell in the first half because of tough competition in sluggish European markets but reaffirmed its guidance that its operating margin will top 4% in 2005, compared with 5.9% last year.
According to AP, the company said the introduction of a rejuvenated version of its popular Clio compact in the autumn will give sales a boost, but warned of difficulties with the new Twingo, which won’t be launched until 2007.
Renault reportedly booked a charge of €60 million ($US72 million) against first-half earnings to cover costs associated with the delay, saying newly appointed chief executive Carlos Ghosn wants to allow more time to perfect the Twingo’s design and ensure that the model is profitable when it arrives in showrooms.
Net profit, calculated under International Financial Reporting Standards introduced by many European companies this year, climbed to €2.17 billion ($2.6 billion) in the first half of the year, from €1.41 billion in the year-earlier period, the Associated Press said. The 2005 figure came in ahead of an average analyst forecast of €1.96 billion ($2.35 billion).
The closely watched operating profit before exceptional items declined 15% to €943 million ($1.13 billion), or 4.4% of revenue, compared with €1.11 billion, or 5.4% of revenue, in the first half of 2004.
Operating profit dropped by a worrying 23% to €677 million ($812 million) at the auto division, analysts reportedly said.
“It shows Renault is struggling to manage its lineup,” JP Morgan analyst Philippe Houchois reportedly told Dow Jones Newswires. “Renault is back with its classic product-cycle woes.”
But analysts also said the decision to delay the Twingo is a sign that Ghosn has seized control of the business, AP noted. Ghosn, who was dispatched to Tokyo six years ago by Renault to turn around Nissan, took the CEO job at the French company in April.
According to the Associated Press, Renault said rising raw material costs, mainly for steel and plastic, took an €80 million ($95.9 million) toll on first-half operating profit. The shift to tougher pollution standards in Europe, known as Euro IV, will generate additional costs of €150 million to €200 million ($179.8 million to $239.74 million) this year.
AP said Renault, which had already reported a 3.8% jump in unit sales to €1.36 million, said revenue rose 3.8% to €21.32 billion ($25.56 billion) thanks to strong sales outside Western Europe.
Nissan, in which Renault holds a 44% stake, contributed €1.36 billion ($1.63 billion) to the French company’s net profit in the first half, compared with €894 million a year ago. The contribution of truck and bus maker Volvo, in which Renault has a 22% interest, rose to €167 million ($200 million) from €115 million.
The sale of shares in Nissan Diesel Motor Co. and of land parcels in Spain gave a further boost of €310 million ($371.6 million) to net profit in the first half, the Associated Press added.
