Renault Won't Dispose of Volvo AB Stake Soon as Funds Enough, Pelata Says

Renault SA, France’s second-biggest carmaker, doesn’t aim to sell its stake in Swedish truckmaker Volvo AB soon because the manufacturer has enough funds to reduce debt, Chief Operating Officer Patrick Pelata said.

Disposing of the holding will depend on the stock’s price and the French company’s financing needs, Pelata told reporters today at the opening of a research center in Titu, Romania.

“We’re not going to sell the Volvo stake in the short term,” Pelata said. “Renault still has 4 billion euros ($5.2 billion) in debt, which can be reduced through a positive cash flow. We want to cut it to 3 billion euros, which we believe is reasonable.”

Renault holds 20 percent of Volvo as a result of selling its truckmaking operations to the Swedish company in 2000. Renault Chief Financial Officer Thierry Moulonguet said in April that the carmaker has the flexibility to dispose of the stake “when we judge most appropriate.” Renault intends to sell the holding, though “not at any price,” WirtschaftsWoche magazine cited Pelata as saying on Sept. 13.

“It’s much easier to get funding now than three months ago,” Pelata said today. “Renault has no financing problems and no cash-flow problems. The strategic plan is to reduce debt through a positive cash flow or asset sales.”

Renault rose as much as 3.9 percent to 37.14 euros and was up 1.7 percent as of 3:51 p.m. in Paris trading, valuing the Boulogne-Billancourt-based carmaker at 10.7 billion euros. Volvo gained 0.4 percent to 94.95 kronor in Stockholm, giving the truckmaker a value of 199.5 billion kronor ($28.2 billion).

Restoring Profit

The French company returned to profit in the first half, reporting net income of 780 million euros compared with a year- earlier loss of 2.73 billion euros, as revenue rose 23 percent to 19.7 billion euros. Deliveries rose 22 percent, led by a 46 percent jump in Asia and Africa and a 22 percent gain in Europe.

Europe’s car market expanded 0.6 percent in the first half, according to the region’s auto-manufacturers’ association. Full- year industry sales in Europe will probably shrink by 7 percent, the lower end of Renault’s 7 percent to 9 percent decline forecast for the market, Pelata said today in an interview. Renault’s sales in the region will show “significant” growth following the company’s first-half increase, he said.

To contact the reporter on this story: Irina Savu in Titu, Romania, via isavu@bloomberg.net; Andra Timu in Titu, Romania, via atimu@bloomberg.net.

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