Renault posts H1 loss of $3.82 billion
PARIS — Renault said Thursday that it made a net loss of euro2.71 billion ($3.82 billion) in the first half after the French carmaker aggressively cut production to boost cash flow, missing out on some of the demand created by government incentives.
In the six months through June 2008, the French auto maker made a net profit of euro1.58 billion. Revenue dropped 24 percent to euro15.99 billion.
Commerzbank analyst Daniel Schwarz said earnings were “in line with expectations” with a “one-time positive effect” on cash flow from the reduction of inventory.
Chief operating officer Patrick Pelata said he expects improved sales in the second half after Renault calibrated its output to match government schemes to encourage people to scrap old cars and trade them in for newer, less polluting versions.
He recognized that such schemes can’t last forever, but said the crisis “is still here” and pleaded for a gentle withdrawal of the aid to allow auto makers to adjust.
Renault shares closed up 1.5 percent at euro28.94 in Paris.
Automakers around the world are battling to save cash by running down inventories and cutting costs as they struggle to deal with a collapse in big-ticket purchases amid a global economic crisis.
“The scrapping incentives wave across Europe covering basically 90 percent of Europe at the end started just after Renault decreased its inventory and production level,” he told analysts.
“It was the right decision to make but it happened to be just before market demand rose sharply above our production level and it explains a big part of our weak performance during the first quarter.”
The maker of the Scenic, Megane and Clio caught up in the second quarter, which Pelata said “showed a strong improvement in market share, particularly in Europe. We are expecting this momentum to continue in the second half.”
Through cost cuts, lower investment and smaller stocks, Renault generated positive free cash flow of euro848 million in the period which CEO Carlos Ghosn said demonstrated the auto maker’s “resilience” to the crisis.
“We anticipated the crisis from July 2008 and made the first decisions necessary to weather it,” the CEO said in a statement.
The improvement means Renault will meet its main aims for 2009: achieving positive cash flow — the funds a company is able to generate after maintaining or expanding assets — and an increase in market share.
Renault said it is ahead on some of its cost cutting goals as it deals with the slump.
Spending on research and development fell by 25 percent in the first half, ahead of its 15 percent goal. Renault is in line with its job cut plans after 6,400 employees took voluntary departure in Europe and ahead of its stock reducing targets with euro860 million worth of cuts in the first half.
Auto sales fell less sharply in the second quarter — 16.9 percent — than the first, when the drop was 30.8 percent.
Renault has revised its 2009 world market forecasts upward to more than 57 million units, which represents a 12 percent decrease of 12 percent from 2008, compared to an initial forecast of a decline of 15 percent.
The results compare to crosstown rival PSA Peugeot-Citroen, which reported on Wednesday a euro962 million ($1.37 billion) net loss in the first half, but also reassured investors with strong cash flow of euro467 million.
Tokyo-based Nissan Motor Co., 44 percent owned by Renault, accounted for 45 percent of the first half net loss — or euro1.22 billion — but CFO Thierry Moulonguet noted that the Japanese auto maker improved its performance in the latest quarter.
Nissan reported a smaller-than-expected 16.5 billion yen ($175.5 million) loss for its fiscal first quarter — Renault’s second quarter — on Wednesday.
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