Renault Says 2006 Profit Fell
 

Renault SA on Thursday posted a modest rise in second-half profit, but a sag in sales threatened to undermine the recovery promised by Chief Executive Carlos Ghosn - already buffeted by declining profits at sister company Nissan Motor Co.
Paris-based Renault (other-otc: RNSDF.PK - news - people ) said one-time gains helped net profit rise 3.8 percent to 1.24 billion euros ($1.61 billion) in the second half from 1.2 billion euros a year earlier. Full-year net profit fell 14.8 percent to 2.87 billion euros ($3.73 billion) from 3.37 billion euros.
Europe's No.3 automaker said its operating profit margin came to 2.56 percent in 2006, beating its 2.5 percent target. But volume sales fell 4 percent to 2.43 million units, taking Renault further from its benchmark objective of 3.3 million sales in 2009.
The sales target and other goals - including a 6 percent operating profit margin - were announced last year as part of Ghosn's "Commitment 2009" recovery plan. Calling 2006 a "year of transition," Renault said new launches would help it achieve the 3 percent operating margin forecast for 2007.
"We're a long way from the targets that were promised for 2009, but this is a stage we had to go through," said Finance Director Thierry Moulonguet.
Ghosn, who had warned that 2006 would be a low point, is pinning his hopes on the rapid expansion of the low-cost Logan sedan - launching this year in India, Iran and Brazil - as well as the launch of a new Twingo super-mini and Laguna upscale sedan in the final quarter.
Renault forecast that sales would increase slightly in 2007, with most of the growth achieved in the second half of the year.
Shares of Renault SA closed 0.7 percent lower in Paris.
Nissan (nasdaq: NSANY - news - people ), also headed by Ghosn, 52, last week posted a 23 percent drop in fiscal third-quarter net profit and warned that full-year earnings would fall for the first time in seven years.
Despite the challenges facing both companies, the Lebanese-born Frenchman said he saw no reason to drop his 10,000-mile commute from France to Japan and share leadership of the allied automakers with another executive.
"I don't envisage any change unless I feel confidence slipping among the people who count - and that's the shareholders," he told reporters.
Ghosn also said the 800,000 additional sales pledged for 2009 were "not a necessary condition" for the 6 percent profit-margin objective to be met. "But it's a commitment in its own right," he added.
Operating profit at Renault's automobile division fell 33 percent to $742 million last year - leaving the division's operating margin at 1.44 percent - while the sales financing arm posted a 5.8 percent increase in operating profit to 492 million euros ($639 million). The sale of Renault's stake in Scania AB, the Swedish truckmaker, was among one-time gains that boosted net profit in the second half.
France's biggest automaker, PSA Peugeot (other-otc: PEUGY.PK - news - people ) Citroen SA, on Wednesday announced a plunge in 2006 net profit and said its operating margin fell to 2 percent last year from 3.4 percent in 2005.
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