Weaker Renault pricing kept a lid on core profitability in the first half, the French carmaker said, rattling investors and sending its shares sharply lower.
The manufacturing division’s weaker-than-expected performance overshadowed record levels of group revenue and profit in January-June, driven by the inclusion of Russian Lada sales and higher earnings from alliance partner Nissan.
The automotive profit margin rose a modest 0.1 point to 4.8 percent, Renault said, despite the 10.4 percent jump in deliveries it posted earlier this month.
The results drew comparisons with domestic rival PSA, after the Peugeot maker’s stronger pricing yielded a 7.3 percent core margin on relatively flat sales.
Renault’s automotive margin was “slightly up on last year but still a little bit below some of the benchmarks”, Societe Generale analyst Stephen Reitman said.
The Renault-Nissan alliance expects to pass Toyota and Volkswagen this year to become the largest auto group by sales, Chief Executive Carlos Ghosn has said.
Renault, 43.4 percent-owned Nissan and recently acquired Mitsubishi Motors will unveil new goals and plans for closer operational integration later in 2017.
The first-half performance “puts us on solid ground for the implementation of our next strategic plan”, Ghosn said.
The consolidation of Russian subsidiary AvtoVAZ helped group revenue to rise 17 percent to 29.5 billion euros ($34.5 billion). Operating profit increased in step to 1.82 billion euros for a 6.2 percent group margin, up 0.1 point.
But Renault’s 27 billion euros in automotive revenue fell nearly 500 million short of expectations, based on the median of 12 analyst estimates polled for Reuters, while overall operating profit was in line with the consensus.
Bernstein analyst Max Warburton described the performance as “very, very odd” in light of Renault’s recently updated model lineup, reaffirming his “market-perform” rating on the stock.
“Renault is at the peak of its product cycle, selling into what appears to be a very strong European market,” Warburton said. “All the stars should have aligned this year.”
The carmaker’s shares fell as much as 7.2 percent to 75.20 euros after the results announcement before recovering to 76.60 euros as of 0929 GMT, down 5.5 percent on Thursday’s close.
Finance chief Clotilde Delbos said the European business suffered from a “negative trend in the channel mix” – which typically reflects a shift toward heavier discounting.
“We’ve also seen some pricing pressure in some countries,” Delbos added, citing South Korea in particular.
Efficiency savings, which had all but evaporated last year, contributed a 204 million-euro profit gain as cost-cutting resumed, and net income jumped 58 percent to 2.38 billion euros thanks to a 1.29 billion Nissan contribution, up 72 percent.
Lada also returned unexpectedly to profit, promising to lift future Renault earnings as the Russian market recovers. Renault recently upgraded Russian and Brazilian forecasts.