Renault Reports Higher-Than-Expected First-Half Profit Growth image

Renault reported higher-than expected first-half profit, thanks to higher vehicle prices and labor-cost reductions which offset the slump in Europe.

Renault EBIT increased 15% to 583 million euro, compared with 508 million euro during the same period last year. Analysts predicted that earnings would drop to 397 million euro. In March the French automaker signed a deal with labor unions to reduce workforce in its home market by 17% and also freeze salaries to be able to avoid closing plants in France in the following three years.

Renault tries to increase sales outside Europe and therefore reduce its dependence on this market. The currency effects cut the operating margin by 242 million euro, but 261 million euro were brought by the higher prices for vehicles.

“After the better-than-expected first-half results, guidance looks achievable,” Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG, said today by e-mail. “We expect a positive share-price reaction today.”

Carmaking business operating margin increased 82% to 211 million euro and profit as a proportion of sales was up 0.5 percentage point to 1.1%. Back in February the automaker said that it plans to reach a ‘positive’ free cash flow and operating margin this year.

Source: Bloomberg