French auto-maker Renault rammed profits into top gear in the first half, results showed on Wednesday, and the group raced ahead on the stock market where analysts said momentum was being generated by the parent and not just from Japanese affiliate Nissan. The "Megane" car model was the star performer. The results caught spectators in the stock market stadium unprepared and even took Renault itself by surprise.
Net profit rose by 28.5 percent to 1.513 billion euros (1.83 billion dollars) and operating profit nearly tripled to 1.205 billion euros.
The stock market was caught on the wrong foot but immediately revised upwards the company's capitalisation: the price of shares in the auto group was showing a gain of 6.05 percent to 64.90 euros in mid-day trading in Paris.
A trader at an independent stock broker here, who declined to be named, commented: "These are very good figures, excellent in fact, but not totally surprising because Peugeot had also published excellent figures and because Nissan is in very good shape.
"But the operating profit is really impressive because it is far higher than expected."
Added Philippe Barrier, an analyst with SG Securities: "Profitability by model was better than expected, thanks to two unexpectedly strong factors - the sale of more profitable vehicles and a reduction in costs - and a pickup in sales outside western Europe."
The group raised its target for operating margins, a key profit measure, by about 25 percent to 5.5 percent of sales for the year from 4.5 percent at the beginning of the year.
But it said the European car market would expand by only 1.0-2.0 percent this year. On Tuesday its French rival Peugeot Citroen PSA reported a 21.6-percent drop in net profit in the first half but pleased the market with an operating margin of 3.7 percent.
Renault said its world-wide vehicle sales rose by 6.5 percent to 1.306 million, led by the Megane family car, but also by strong sales of the "Espace" people-carrier, the pioneer of its segment in Europe.
Commercial vehicles also did well, and international sales had been robust, notably in Turkey.
Renault also enjoyed increased proportion of sales of vehicles generating high profit margins and took advantage of cuts in purchasing and production costs.
The net profit figure was in line with forecasts by analysts but the operating outcome was far higher than they had expected.
The strong performance arose from good figures by Renault itself and not solely to the performance of its Japanese partner Nissan. The contribution from Nissan rose by 9.9 percent to 939 million euros.
Group sales rose by 11.6 percent to 20.76 billion euros, and the operating margin was 6.1 percent from 3.2 percent in the same period of last year.
In the first half of last year net profit was 1.177 billion euros and operating profit 418 million euros.
Group chairman Louis Schweitzer said: "These are very good results which are significantly higher than we had expected and far higher than the market and analysts had expected."
He noted that "the profits rise was pulled by operating margins and sales by Renault itself which is an important factor for the (Renault-Nissan) alliance".
The strong trend of the first half should continue in the second half. And in the second half the group would begin to renew its model range with the launch of a small monospace or people carrier to be called the "Modus".
Although the rise of net earnings would be boosted by nine months of profits from Nissan instead of six months in the first half, operating margin, at 4.8 percent, would not increase from the first-half figure owing to seasonal factors, he said.
Asked if Renault had reached a peak of performance in the first half, he said that he was "fairly sure that there is room for further progress".
Net debt for the auto activities had fallen by 937 million euros to 811 million euros on June 30.