Renault Profit Gains 10% as New Models Boost Sales (Update6)
Renault Profit Gains 10% as New Models Boost Sales (Update6)
By Laurence Frost
Feb. 14 (Bloomberg) — Renault SA, France;s second-largest
carmaker, said second-half profit rose 10 percent on European
sales of the low-cost Logan sedan. The shares fell as the company
said it would reduce production of the mid-sized Laguna.
Net income advanced to 1.39 billion euros ($2 billion) from
1.26 billion euros a year earlier, Chief Financial Officer
Thierry Moulonguet said today in a press briefing.
Chief Executive Officer Carlos Ghosn said the European auto
market will be “stable at best;; in 2008, and more likely show
a decline over the next two years. He is counting on the no-
frills Logan to boost sales abroad and a rash of new models at
home to lift operating profit to 6 percent of revenue next year
from 3.2 percent in 2005.
“We need to see some punchy numbers in terms of
registrations for people to start believing in the guidance,;;
said London-based Nomura analyst Michael Tyndall, who recommends
buying the carmaker;s stock.
Renault fell 3.62 euros, or 4.9 percent, to 70.93 euros in
Paris, valuing the company at 20.2 billion euros. The stock has
declined 27 percent this year, the biggest decline on the Dow
Jones Stoxx Autos %26amp; Parts index of European automotive shares.
Laguna Production
Renault is reducing production of the new Laguna hatchback
to trim stockpiles after sales were hurt by environmental taxes
on larger cars in France and Spain, Ghosn said. He declined to
give details of the production cuts.
“We don;t want dealers to get into a position where
they;re having to push the Laguna,;; Ghosn said. Renault had
2,900 French registrations for the Laguna in January.
The model, introduced in October, is a key test of
Renault;s planned move into upscale cars that is set to continue
with the introduction of a Koleos sport-utility vehicle in June.
Weak sales of the Laguna could have an effect on the
success of later models such as the Megane compact, a crucial
Renault vehicle due for an update late this year, said London-
based JPMorgan analyst Philippe Houchois.
“Big cars have a halo effect that helps position the brand
and can encourage people to pay more,;; said Houchois, who has a
“neutral;; rating on Renault. “So if the halo car doesn;t sell
that much, it doesn;t help the pricing environment for the whole
range.;;
Carbon Emissions
Under the French green tax that took effect Jan. 1, people
buying cars that emit more than 160 grams of carbon dioxide per
kilometer have to pay a one-time levy starting at 200 euros and
rising to 2,600 euros for the biggest engines.
Renault has forecast a 10 percent increase in vehicle sales
this year. Larger French rival Peugeot said yesterday that the
European car market may show a “slight decline;; this year as
economies slow.
Speaking in an interview with Bloomberg Television, Ghosn
reiterated a sales target of 3.33 million vehicles for 2009.
Sales rose 2.2 percent last year to 2.49 million cars and light
trucks, thanks to a 48 percent gain for the Logan, sold as the
Dacia outside western Europe.
“We;ve yet to persuade the market that the Logan isn;t
just a volume booster, it;s a profit booster,;; Ghosn said.
“Low-cost cars aren;t necessarily low-profit cars.;;
Logan Profit
The Logan;s operating margin jumped to more than 6 percent
in Europe last year, from less than 3 percent in 2006, Ghosn
said. The model will reach that target globally in 2008, he said.
Earnings before interest, tax and one-time items advanced
34 percent to 632 million euros in the half, missing the median
estimate of 684 million euros by 10 analysts surveyed by
Bloomberg News. Full-year operating profit rose 27 percent to
1.35 billion euros for a 3.3 percent operating margin, meeting
Renault;s “more than 3 percent;; forecast.
“The auto division;s profitability was stronger than I
expected in the second half, which is encouraging because that;s
when they started launching the new models,;; Tyndall said.
After a one-year delay, Renault introduced the Twingo II
small car last June, the first of 26 new models promised by the
end of next year.
Revenue rose 5.3 percent to 20.1 billion euros in the
second half, missing the 20.3 billion euros expected by
analysts. The median net-income estimate was 1.28 billion euros.
Renault;s European sales fell 4.4 percent to 1.38 million
vehicles last year, compared with a 0.6-point gain for Peugeot,
which has more new models in showrooms and yesterday said full-
year profit more than quadrupled on lower costs and sales of new
models such as the Citroen C4 Picasso minivan.
To contact the reporter on this story:
Laurence Frost in Paris at
