Renault‘s first half financial results – due to be announced later this week (July 30) – are expected to show some improvement in trend, but the company continues to be dragged down by a poor European market showing this year.


Sabine Blümel, an analyst with Creative Global Investments (LLC), told just-auto that she expects Renault to report an EUR538m group operating loss for the first half, a marginal improvement on 2H08’s EUR653m loss. Together with an estimated EUR 2.2bn loss from associates (Nissan, Volvo and AvtoVAZ) she said she expects an EUR2.88bn net loss.


She also expects the automotive division to show some sign of improvement.


“We estimate that an already announced 16.5% year-on-year slump in vehicle sales to 1.11m units will lead to an EUR746m operating loss, marginally up on EUR873m in the second half of last year,” she said.


Renault was at least quick to respond when the European market collapsed late last year. Blümel estimates that Renault cut first half production by some 35% year-on-year, in order to reduce excess inventories; -25% in 2Q09E, after -47% year-on-year in 1Q09E.


However, Renault’s European sales have continued to disappoint in 2009 with discount brand Dacia benefiting most from scrappage incentives across the region..


“Dacia benefitted most from government incentive schemes and saw its European sales triple in the second quarter,” Blümel notes.


“In contrast, the Renault brand’s European sales fell another 18.5% year-on-year in the second quarter, after -25.6% in the first quarter, sharply underperforming both the French and European market. We estimate that the continuing deterioration in mix had a negative impact on unit revenue and margin.”


Investors will likely pay close attention to chief executive Carlos Ghosn’s remarks later this week. Ghosn recently said that 2010 would be as difficult as 2009 for the auto industry in Europe when scrappage incentives disappear and the market goes into reverse unless a resurgent economy can take up the slack.


Blümel expects a 9.4% decline in Renault group sales this year to lead to a full-year ’09 EUR1.2bn operating loss at the auto division. The implied improvement in 2H09E to a EUR427m loss is based on sales stabilising at low level and benefits from a deeper cooperation with Nissan.


She also expects a FY09E group net loss of EUR3.76bn.