Bloomberg News

Renault Shares Rise After Third-Quarter Revenue Beats Estimates

October 28, 2011

Oct. 28 (Bloomberg) -- Renault SA, France’s second-biggest carmaker, rose as much as 4.6 percent after reporting third- quarter sales that beat analysts’ estimates on higher demand for the Sandero model in Brazil and Russia.

Revenue increased 12 percent to 9.75 billion euros ($13.8 billion) from 8.71 billion euros a year earlier, Boulogne- Billancourt-based Renault said late yesterday in a statement. Sales beat the 9.63 billion-euro average of four analyst estimates compiled by Bloomberg.

“The positive is that it’s a touch better than expected,” said Gaetan Toulemonde, an analyst with Deutsche Bank in Paris, who recommends buying the shares. “The numbers are still low, but since there will be a fireworks of new products starting next year, hopefully the margin will improve.”

Renault is expanding sales outside Europe to reduce its dependence on the region’s car market. Demand for vehicles in France shrank last month, contributing to an industrywide decline in Europe in the first nine months of the year. Sales in western Europe may fall to 12.6 million vehicles in 2012 from 13 million posted last year, according to J.D. Power & Associates.

Renault climbed as much as 1.38 euros to 31.69 euros and was up 3.4 percent to 31.34 euros as of 9:15 a.m. in Paris trading. The shares have dropped 28 percent this year, valuing the carmaker at 9.26 billion euros.

Sandero Boost

Profit margins in South America and Russia are “above company average, so everything that increases in those regions is clearly good news,” Chief Financial Officer Dominique Thormann said yesterday on a conference call. “It’s good business in general.”

Renault, which was hobbled by a lack of parts for diesel engines in the first half, increased deliveries 6.7 percent to 632,412 vehicles in the third quarter, outpacing global growth of 3.7 percent. The French automaker more than doubled sales of the Sandero compact in Russia. Demand for the model, which starts at 7,900 euros in France, helped Renault raise market share in Brazil to a record 5.8 percent, it said.

“Macro-economic uncertainties, especially in Europe, have not yet had a notable impact on automotive demand,” Renault said in the statement. “As a result of its order book in Europe and strong international sales momentum, the group expects to post higher sales volumes and revenues than in 2010.”

Price War

Renault is suspending carmaking at a plant in Douai, France, for two days at the end of this month to restrain production. Overall, production should rise more than 10 percent in the fourth quarter compared with the third, Thormann said.

Paris-based competitor PSA Peugeot Citroen, which this week cut its full-year profit forecast and announced plans to reduce its workforce, is also halting assembly lines temporarily at two factories over the next two weeks. Europe’s second-largest carmaker said pricing deteriorated “dramatically” in September, reducing margins.

A “price war” that started late last year after the end of government sales incentives in Europe will likely continue through the end of the year, Jerome Stoll, Renault’s sales chief, said on the conference call.

Volkswagen AG, Europe’s largest automaker, said yesterday that third-quarter earnings surged 46 percent because of growing demand for Audi and VW-brand sport-utility vehicles. Operating profit totaled 2.89 billion euros, beating the average analyst estimate of 2.61 billion euros.

--Editors: Chris Reiter, Chad Thomas

To contact the reporter on this story: Alex Webb in Frankfurt at awebb25@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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