The Wall Street Journal (Paris) - Renault SA on Thursday reported a jump in first-half net profit and revenue, as the car maker was boosted by contributions from affiliated companies, reduced financing costs, a revaluation of assets, and a much reduced tax burden.
First-half net profit rose 56% to €1.22 billion ($1.75 billion) from $780 million a year earlier, while operating profit rose by €54 million to €772 million. Revenue rose 7.3% on the back of a 1.9% increase in vehicle sales, reaching €21.1 billion from €19.67 billion, and the company's automotive operations generated €121 million of free cash. Operating margin for the first half was 3% of revenue compared to 4% in the first half of 2010.
The company said it took a hit estimated at €150 million due to the Japanese earthquake and tsunami that disrupted its supply chain and caused it to lose sales. The lingering effects of the Japanese events are expected to cost a further €50 million in the second half of the year, Chief Financial Officer Dominique Thormann told a group of journalists.
Financing costs fell sharply in the first half to €81 million from €246 million a year before, partly thanks to the early repayment of a costly €3 billion state loan offered by the government to during the financial crisis to ease a liquidity squeeze. The re-evaluation of assets contributed €80 million to the positive swing in Renault's bottom line.
Russian affiliate AvtoVAZ, in which Renault has a 25% stake, made a positive contribution of €37 million, compared to a loss of €56 million a year before.
Mr. Thormann said rising raw-material costs weighed for €313 million in the first half, and said this trend is likely to continue in the second half. This is a deterioration from the €450 million to €500 million extra raw material costs that the company had budgeted for this year, he said. However, Renault managed to offset €279 million through cost savings.
Renault has come in for criticism for the low level of profitability of its automotive division, and in the first half this core segment reported operating profit of €221 million, or 1.1% of revenues, down €189 million from a year before.
Apart from the extra raw materials costs, Renault took a hit of €102 million from unfavorable currency movements, and a mix/price distortion of its vehicle sales due to supply disruptions that it estimated at €91 million.
