Renault optimistic on global car sales

Renault reported better than expected first-half earnings on Thursday, upheld its full-year earnings guidance and said global car sales would grow by 3-4 per cent this year, delivering a balmier forecast for the bellwether industry than some of its competitors.

The French carmaker reported net income of €1.25bn ($1.8bn) for the year to June, up from €823m in the first half of 2010. Its first-half operating margin was €630m, or 3 per cent of revenues, down from €780m a year ago, but ahead of analysts’ consensus forecast of €586m.

That was despite higher raw materials costs and the disruption to its business from Japan’s earthquake and tsunami in March, the negative impact of which the company estimated at €150m.
Renault’s earnings included a net gain of €557m from its affiliates Nissan, AB Volvo and Avtovaz.
The company confirmed its full-year guidance of automotive operational free cash flow of more than €500m and a ratio of capital expenditure and research and development of less than 9 per cent of revenues.

It said it expected the European market to remain stable or contract by 2 per cent this year and estimated the impact of the tsunami on its operating margin in the second half at another €50m.
The company reported record first-half sales of 1.4m units, up 1.9 per cent on a year ago. “The sales record in the first half confirms the group’s strong potential for international growth,” said Carlos Ghosn, chairman and chief executive.

Renault’s benign forecast contrasts with notes of caution sounded by its competitors PSA Peugeot Citroën and Daimler, which this week warned of headwinds facing the industry from higher raw material costs and softening demand for cars in emerging markets. Peugeot stepped back from its previous earnings guidance, saying only that it expected its operating profit to be higher this year than in 2010.

JPMorgan, which has an “overweight” recommendation on Renault’s stock, wrote in a research note: “We expect a positive reaction to the results.”