Thursday July 30, 10:27 AM
Renault reports big loss
PARIS (AFP) - French auto group Renault (Paris: FR0000131906 - news) reported on Thursday a first-half net loss of 2.71 billion euros (3.8 billion dollars) as sales slumped 23.7 percent to 15.99 billion euros but said the outlook was improving.
The loss figure contrasted with a net profit of 1.58 billion euros in the first half of last year.
Despite the loss, Renault, which controls the Japanese automaker Nissan Motor, maintained its 2009 forecasts, expecting some parts of the market to recover from the global economic slump which has rocked the industry.
The company reported a big drop in its stocks of unsold vehicles but they remain high however.
Renault revised upwards its forecast global auto industry sales this year to more than 57 million vehicles, representing a fall of 12 percent from the figure in 2008 compared with its previous estimate of a downturn of 15 percent.
In Europe, the market "should improve over the second half of the year to show a fall of eight percent," compared with a drop of 13.7 percent in the first six months, the company said.
Managing director Patrick Pelata said "Renault has been hit severely by the crisis."
On Wednesday, the other French mass car maker, PSA Peugeot Citroen, reported a first-half net loss of 962 million euros.
The French government has supported the sector during the economic crisis by offering subsidies for buyers who scrap an old car to buy new, a policy adopted in some other European countries.
Renault said sales in the six months fell 23.7 percent to 15.99 billion euros but noted there had been a distinct improvement between the first three months of the year, when sales were down 30.8 percent, and the second quarter to June when they fell 16.9 percent.
The first-half loss was largely attributable to losses at associate companies, with Nissan in the red for 1.22 billion euros, AB Volvo 196 million euros and Russia's Autovaz 182 million euros.
"Renault is holding up" against the slump, chief executive Carlos Ghosn said in a statement.
The group's share of the global auto market was steady in the first half at 3.7 percent.
For the whole of the year, the company stood by its targets announced at the beginning of the year, of increasing its market share and achieving positive free cash flow, a reference to the rate at which the company earns cash compared to the rate at which the money is spent.
This measure showed a surplus of 848 million euros, higher than the figure allowed for under a cost-cutting and investment programme.
Inventories of unsold cars, a key factor for auto companies, were down by 2.0 billion euros on a 12 month comparison at the end of June when they were worth 4.4 billion euros, finance director Thierry Moulonguet said.
By volume, inventories fell 510,000 to 315,000 vehicles in the period.
Moulonguet said there was a constant rise in orders which were running at about the level of 2007 and the group had decided "to increase its production plans significantly."
Pelata said "our solid order book makes us confident that the second half will be better than the first" and that measures to cut the wage bill were going well.
"The results are encouraging and confirm the thinking of our strategy for managing the crisis (even though) ... market share is below expectations" for the first half, he said.
In the second half, Renault expected to see the full benefits of the relaunch of its Megane car range and also of the new Scenic model which was launched recently.
Ghosn said "we are already preparing Renault for conditions after the crisis with the mass marketing of zero emission vehicles from 2011, a broadening of the range of 'entry-level' models, by strengthening our presence in emerging markets and accelerating economies of scale with Nissan."
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