Renault reports sharp decline, profit down 39% image

French carmaker Renault said its profit fell 39 percent in the first half of the year as new car sales in Europe fell more than expected.

The company said that it expects that trend to continue in the second half of the year and become even more pronounced.

It now predicts the French market will contract 10% to 11%, and the rest of Europe will shrink 6% to 7%. Global demand, by contrast, should rise 5%.

Renault and other European automakers are weathering a severe market slump that led PSA Peugeot Citroen to post an 819 million-euro first-half loss this week. Unlike its larger domestic rival, Renault offers low-cost cars through its Dacia brand that have benefited from resilient demand.

The Group sold 1.33m units, down 3.3% on first-half 2011.

In the first half 2012, Group revenues came to 20.935 billion euros, down 0.8% from 21.1 billion euros a year earlier.

The Group posted an operating margin of EUR482m or 2.3% of revenues, compared with EUR630m – 3% of revenues – in first-half 2011.

Operating income was EUR519m in first-half 2012, compared with EUR772m in the first half of 2011.

Renault, which earns most of its money selling low-cost and mid-market vehicles, is considering adding two upscale brands and expanding further in emerging markets to decrease its reliance on Europe’s volume car business.

Renault’s shares closed at 33.80 euros on Thursday, up 2.4% on the day and valuing the company at 9.76 billion euros.