- New and revamped models include an SUV and upgraded Megane
- CEO’s variable compensation cut after shareholder opposition
Renault SA’s first-half earnings jumped 41 percent thanks to higher prices, a more expensive lineup and new cars including the Kadjar sport utility vehicle and Espace minivan.
Operating profit rose to 1.54 billion euros ($1.7 billion) from 1.1 billion euros a year earlier, the Boulogne-Billancourt, France-based company said Thursday in a statement. That compares with the 1.44 billion-euro average of five analyst estimates compiled by Bloomberg. The operating margin rose to 6.1 percent of sales from 4.9 percent.
Renault, Europe’s third-largest automaker, is introducing 10 new and revamped models this year as it seeks to benefit from a recovery in the European car market, which grew by 9.1 percent in the first half. The additions include an SUV and an upgraded Megane hatchback. The picture outside Europe has been mixed, however.
“Results are good and ahead of expectations,” said Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG. The figures are the latest in a string of positive reports from the European auto industry, he said, citing Volkswagen AG, PSA Group and suppliers such as Faurecia and Valeo SA.
The outperformance may have already been reflected in Renault’s shares, which as of Wednesday had surged 22 percent since touching their low for the year on July 6. The stock fell 2.8 percent to 77.35 euros at 10:55 a.m. in Paris.
Pierre Quemener, an analyst at MainFirst Bank AG, said expectations were high after positive earnings in the auto sector this week. Renault “delivered results that were clearly above expectations, but not dramatically above expectations,” he said, adding that some investors may also gave been disappointed by the company’s cash generation and an increase in its debt.
Renault said Wednesday it’s cutting Chief Executive Officer Carlos Ghosn’s bonus after the French government and other shareholders opposed the level of his pay. He now can earn as much as 120 percent of his fixed salary if the company meets specific financial criteria, down from a maximum of 150 percent previously.
Ghosn is still eligible for “exceptional compensation” that would boost the bonus to 180 percent of his pay if a further set of objectives are achieved. Last year, Ghosn’s variable pay represented 145 percent of his fixed wage.
Renault predicted the global auto market will expand by about 1.7 percent this year, cutting a previous 2 percent growth estimate because of a slowdown in North America and import restrictions in Algeria. The carmaker confirmed it expects 5 percent growth this year in Europe, where it made more than 60 percent of its deliveries in the first half.
In recession-mired Russia, Renault plans to participate in a capital increase for AvtoVAZ Group, taking control of the struggling local affiliate by the end of the year, Chief Financial Officer Clotilde Delbos told reporters in a telephone briefing.
The U.K. market has peaked and will probably decline, though it’s too early to to say what impact the country’s decision to leave the European Union will have on Renault’s sales, Delbos said.
Renault stuck to its full-year financial targets of increasing revenue at constant exchange rates, improving its operating margin and generating positive operating free cash flow for its automotive division this year.