Profit rose to 720 million euros ($770.2 million), or 3 euros per share
from 677 million euros, or 2.8 euros per share in the year-earlier
period, beating expectations for profit of 603 million euros, or 2.5
euros per share.
Renault boosted profit even as its tax bill doubled after the expiry of
tax credits last year. Its popular Megane models and its Clio and
Twingo small cars helped it expand its European market share to 11
percent from 10.5 percent in the period.
``Cost-cutting is obviously paying dividends,'' said Simon Miller, an
analyst at Credit Lyonnais. ``On the revenue side, it's made good
gains, particularly in Germany. It's gained several points in the U.K.
and other key European markets, improving its model and geographic
mix.''
Operating margin, or operating income before restructuring costs, rose
29 percent to 1.212 billion euros. Excluding a charge of 25 million
euros for restructuring its subsidiaries, operating income rose to
1.187 billion euros from 891 million euros.
``To achieve that level of margin as a mass market volume producer is
pretty impressive,'' said Miller, who rates the stock a ``buy.''
Renault is ahead of European rivals, whose margins are on average lower
than 4 percent.
The carmaker widened its operating margins to 6.2 percent of sales from
5.1 percent of sales a year earlier. The company cut costs by 400
million euros in the first half and said it's on track to cut costs by
3 billion euros by 2000 as part of its three-year cost-cutting plan.
Confidence
Renault said it's confident it will generate full-year operating margin
``superior to that of 1998.'' The company said its recovery plan for
Nissan Motor Co., Japan's No. 2 automaker, in which it bought a
37-percent stake, will be ``taken into consideration'' in the second
half. Renault said the plan will be announced by Nissan management in
October.
The company, which earlier predicted 1999 would bring a ``less buoyant
climate'' than last year, expects sales to rise 10 percent for the full
year to 2.15 million units. The inventor of the minivan had first-half
sales growth of 5.6 percent.
Renault said it wants an 11-percent market share in Europe for the full
year a 30-percent share in France, Europe's No. 4 car market. While the
company `had anticipated a slight downturn in the European market, it
should increase overall by at least 4 percent during the year,'' it
said. Renault is betting on the new Scenic driving that growth.
``I'm fairly happy with these figures,'' said Sabine Blumel, an analyst
at Banca IMI in London, which she said beat her estimate. ``Its very
much driven by reorganizing and restructuring the European plant
network. These figures reflect the influence of the Clio'' small car,
introduced last year.
Renault in August started marketing the new Megane Scenic, the latest
version of its best-selling small minivan in Europe, which accounts for
16 percent of sales.
Renault shares rose 0.45 euro, or 0.9 percent, to 52.5 euros before the
announcement, which came after trading closed.
Sep/02/1999 13:09
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