Renault cost-cutting loses momentum as profit surges

French carmaker’s s operating profit climbs 41 per cent to €1.54 billion

Renault’s net income rose 8.8 per cent to €1.5 billion  in the first six months of the year.
Renault’s net income rose 8.8 per cent to €1.5 billion in the first six months of the year.

Renault made little progress towards promised cost savings in the first half of the year, the French carmaker said on Thursday, although a revamp of its model range helped it achieve record profitability.

The company’s operating profit rose 41 per cent to €1.54 billion, lifting its operating margin from 4.9 per cent to 6.1 per cent, its highest under current accounting standards. Profit at the core automotive division was up 65 per cent, for a 4.7 per cent margin.

Productivity drive

Renault's grip on costs weakened in the final straight of a three-year productivity drive under Carlos Ghosn, who also heads alliance partner Nissan, with improvements to Renault diesel engines raising research and development (R&D) spending.

Productivity savings all but evaporated to just €6 million in the first six months, even as net income rose 8.8 per cent to €1.5 billion on €25.19 billion in revenue, which was up by 13.5 per cent.

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"This low level is mainly explained by R&D and some costs related to our product cadence," finance chief Clotilde Delbos told analysts following the results.

The costs setback overshadowed a strong sales performance, sending Renault shares 2.3 per cent lower.

Product offensive

The company is reaping the rewards of a product offensive that has seen all major model lines updated, helping it outpace demand in most global markets and overtake rival PSA Group as Europe’s second-biggest carmaker.

Operating profit beat analysts’ expectations of €1.39 billion euros at group level and €958 million for the auto division, based on the median of 10 estimates in a Reuters poll. – (Reuters)