Renault’s profit growth not enough to alleviate pricing woes image

The second largest French automaker, doctor unhealthy Renault SA, stomach has recently reported that its profit from the first six months of the year had grown under the beneficial influence of the European region’s turnaround.

But the massive increase was still not strong enough to ail the investor worries that were pointing out to the company’s weaker pricing that eroded earnings margins. While the company did manage to achieve its best operating margin in a decade, at 4.8 percent, the stock of the automaker took a beating as the investors were comparing the results with those from its closest competitor – PSA Peugeot Citroen, which engineered a dramatic recovery from the brink of collapse in the past year. “Clearly Renault has not beaten as handsomely as Peugeot did,” commented Morgan Stanley analyst Harald Hendrikse. The company “is not showing the same operational improvements”, he added in a note addressed to clients, also pointing out there was “no evidence of any price improvement in Europe”.

Chief executive officer Carlos Ghosn has called for renewed action on increasing the carmaker’s productivity and technology sharing with its alliance partner – Japan’s second largest automaker, Nissan. He also emphasizes all the other agreements and collaborations, including the long-standing relationship with Daimler in its desire to exceed a 5 percent operating margin. Renault had to postpone that threshold achievement by 12 months to 2017, showing the effects of a slowdown in model turnaround, though chief financial officer Dominique Thormann showed confidence the goal would be achieved “probably sooner than planned”.

Via Reuters