Money Matters - Simplified

Profits of Renault show a downslide with plummeting sale figures

The famous French Car manufacturer Renault has testified that there has been a intense waning in the collection of profits this year. The sales have plummeted in Europe leading to a loss in revenue, which is a total opposite to the full-bodied rise of its upcoming markets business and its collaboration with Nissan from Japan. Even besides the sweepingly slow trade figures, Renault still holds fort that it is anticipating its worldwide vehicle sales to go up in 2012. The net profit in the first half of the year has shown a 39% drop in earnings.

The fate of the Renault automobile sales is worse as compared to the other car makers of Europe. The industry experts feel the annual sales of the European Automobile sector will be nearly 23% less than the sales of 2007. Renault predicts a further contraction of sales, of approx 6 and 7% than the previous estimates in 2012.

Chief Executive Carlos Ghosn fears that a noteworthy recovery of the sales figure is a far cry in the coming years. Renault accounted for a total profit (after valid deductions) of €746 million ($910 million) for first 6 of 2012, which has gone down 39% from €1.22 billion the previous year. It failed to reach up to the analysts’ expectations of a €873 million net profit.

The Operating margin slipped down 2.4% to 2.3% of sales. First half of 2011 had the operating margin 3% of sales. The vehicle sales fell down by 3.3%, pulling the revenue down 0.8% to €20.94 billion."In a difficult and uncertain environment, Renault remains on track to meet its 2012 objective of positive automotive operation cash flow," claimed Mr. Ghosn, although the first half of the year showed a negative €200 million.

Automobile makers face the sad scenario of a reduction in sales of automobiles and a stiff competitive price battle with the other contemporaries in the same line of production. They are in a desperate attempt to maintain the price of their share value and controlling the production line.The end result is a desperate effort to reduce the manufacturing of the vehicles to suit the current market demand.This will also lead to a tapering down of costly inventories.

Renault sees a ray of hope as it has done better than its arch rival PSA Peugeot Citroen that showed a net loss of €819 million from the previous year profit of €806 million.