PARIS: French automaker Renault reported a near 15% slide in net 2006 earnings but said it was banking on emerging markets and new models in Europe to boost sales this year.
Chief executive Carlos Ghosn predicted “a return to growth from autumn onwards” but warned that the first part of 2007 would remain challenging for the company.
Net profit last year fell 14.8 % from 2005 to 2.9 billion euros (3.7 billion dollars), slightly better than expectations of 2.7 billion euros, according to a survey of analysts by Thomson Financial.On the Paris stock exchange, shares in Renault closed 0.71 percent lower at 91.25 euros in a broadly lower market.
In Europe, Renault is counting on the launch of a new Twingo compact car in June this year to boost sales, followed by the launch of the new high-end Laguna in October. The French group added that the low-cost Logan model, which is to be sold in Brazil, Iran and India in the second quarter of 2007, should also help spur sales.
Ghosn stressed that the group would raise its operating margin to 3.0 % this year, from 2.56% in 2006, with the help of the restructuring plan “Contract 2009.”
In 2006, sales in the core European market fell 8.7 % while sales outside of Europe, which account for 30 percent of the total, rose by 2.3 % last year. Overall revenues in 2006 fell 0.8 percent to 41.5 billion euros.
“An increase in production capacity in India, Romania and Russia and the introduction of models designed to meet demand in those developing markets will be the main drivers of Renault’s growth by 2009,” the company said in a statement.At the operating level the company reported a 42% decline to earnings of 877 million euros.
The fall in Renault profits followed a warning from its Japanese alliance partner Nissan Motor Co last week that its full-year results would be lower than expected.Renault owns a 44%stake in Nissan Motor Co and has relied on the Japanese group as a key driver of profits in recent years.
Ghosn, who is chief executive of both companies, said that “all the necessary conclusions” would be drawn after the Nissan profit warning.“There will be very clear operational decisions that will be announced in April. We will draw all the necessary conclusions,” Ghosn said at a press conference.
He said that no strengthening of ties between the two companies was planned after being asked about speculation the French group might increase its stake to 50 %.“I don’t see what that would bring, what it would do to improve in any way the alliance,” Ghosn said.