AvtoVAZ reported a return to profit in the first half of this year to RUR3.1bn (US$102m) thanks to a reviving market and an injection of state aid.

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The Russian carmaker said it had benefited from interest free loans provided by state controlled Russian Technologies while car sales had also been rising.

Revenue rose to RUR62bn (US$2.06bn) for the six months to the end of June from RUR53.1bn (US$1.77bn) in the same period in 2009.

Just a year ago AvtoVAZ facied bankruptcy as the global economic crisis devastated Russian car sales and exposed the company’s outdated business model. It was bailed out by the state, supported – after some government prodding – by 25% shareholder Renault.

Analysts said that AvtoVAZ still faced problems with net debt of over US$2bn along with huge capital spending requirements. The carmaker’s costs also increased 26.3% in the first half as it stepped up production.

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 Russian car sales rose 51% in August from a year ago, helped by a government-sponsored scrappage scheme.

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