Ghosn: New challenge

Paris, July 27 (Reuters): French carmaker Renault reported a drop in its operating margin for the first half but kept its full-year target on Wednesday despite a rise in raw material prices such as steel and sluggish main car markets.

Operating income from its automobile and financing activities slipped to 943 million euros ($1.14 billion) from 1.106 billion euros.

Renault maintained its target of a full-year group-operating margin of more than 4 per cent, after the first-half figure slipped to 4.4 per cent from 5.4 per cent a year ago.

Its shares dipped 0.3 per cent to 75.25 euros by in a flat market for European car sector stocks.

“You see that Renault is under high pressure regarding their margins. The margin pressure was one per cent point in the first half, if you extrapolate this for the full year you end up with 4.2 per cent, which would be really disappointing,” said analyst Jens Schattner at Dresdner Kleinwort Wasserstein.

Boosted by Europe’s top-selling Megane model and the popularity of the no-frills Logan, the world’s fourth-biggest automobile manufacturer said group revenues rose 3.8 per cent to 21.3 billion euros ($25.7 billion).

But this masked a decline in Turkey and in central Europe and a slow take-up of the Modus model.

While Renault will launch a remodelled Clio later in 2005, new chief executive Carlos Ghosn had decided to delay the launch of Twingo until 2007 for fine-tuning of the model. Renault is taking a charge of 60 million euros for the delay.

Finance director Thierry Moulonguet said the full-year cost impact of higher raw material prices such as steel would be at the top of an earlier indicated 150 million-200 million euros range.

He added that second half earnings were seasonally always less than the first, while Renault would have costs to launch the Clio.

Net profit for the first half jumped 52 per cent to 2.211 billion euros from 1.453 billion euros in the previous year, restated for the new IFRS accounting standards, which was ahead of an average analysts expectation of 1.83 billion.

Renault maintained its goal of defending its market share in western Europe, while sales outside that area should be boosted by the Dacia and Samsung brands.