Renault Profit Surges 44% on European Demand for Kadjar SUV

  • Operating margin exceeds 5% a year earlier than planned
  • Carmaker writes down stake in Russian partner AvtoVAZ

Renault SA’s profit jumped 44 percent in 2015 as new models like the Kadjar sport utility vehicle helped the French carmaker gain market share in Europe and hit a margin target a year earlier than planned.

Operating profit climbed to 2.32 billion euros ($2.62 billion) from 1.61 billion euros a year earlier, Europe’s third-biggest automaker said in a statement Friday. That beat the 2.02 billion-euro average of eight analyst estimates compiled by Bloomberg. Earnings as a proportion of sales widened to 5.1 percent from 3.9 percent. Renault was planning on a 5 percent margin in 2016.

“Renault is turning a corner,” Chief Executive Officer Carlos Ghosn said at an analysts’ meeting. “We moved from a cost-cutting and restoring-competitiveness focus to a profitable and sustainable-growth one.”

The French manufacturer is working to lift margins to balance out its alliance with more profitable Japanese partner Nissan Motor Co., whose return on sales in the nine months through December was 6.6 percent. To this end, Renault is rolling out more SUVs like the Kadjar and plans to revive the Alpine sports car. The profitability push has been hampered by expansion into Russia and other emerging markets such as Brazil, where slumping economies have sapped car demand.

Renault was trading up 0.3 percent at 69.07 as of 10:39 a.m. in Paris. The stock retreated from a 5 percent intraday high after Russian affiliate AvtoVAZ Group, the biggest carmaker in the country, said it needs help from owners to survive as the local auto-market contraction led to a record loss.

The French carmaker, which has a 50 percent stake in the company that owns AvtoVAZ, wrote down the value of the holding by 71 percent to 91 million euros. Renault said it’s in talks with other shareholders in AvtoVAZ to recapitalize the Russian manufacturer. Japanese partner Nissan Motor Co. owns 17 percent of AvtoVAZ’s holding company.

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