Renault first-half 2011 financial results

Renault reports net income of €1,253 million, up 52% and positive Automotive operational free cash flow of €121 million. Renault witnessed record first half-year sales, with 1.4 million units sold, up 1.9%, group revenues of €21,101 million, up 7.3% year on year.Group operating margin of €630 million, or 3.0% of revenues (€780 million or 4.0% in first-half 2010). The negative impact of the tsunami in Japan on Group operating margin in first-half 2011 is estimated at €150 million. Group operating income up €54 million to €772 million in first-half 2011,net income of €1,253 million, compared to €823 million in first-half 2010. The company also experienced positive automotive operational free cash flow[1] of €121 million, automotive net financial debt of €1,221 million at end-June, down €214 million in the first half.

Commenting on the results, Carlos Ghosn, Chairman and CEO of Renault, said: “The sales record in the first half confirms the Group’s strong potential for international growth. The financial results were impacted by external events, including supply constraints, which will subside in the second half, and a considerable increase in the cost of raw materials. In this context, the Group confirms its objective of operational free cash flow above €500 million for 2011.”

The Group reported revenues of €21,101 million in the first half of 2011, up 7.3%. Driven by continued international growth, Automotive contributed €20,143 million to revenues. This 7.3% year-on-year increase resulted mainly from an improvement in the sales mix and an increase in volumes.

The Group’s market share in France was negatively impacted in the first quarter of 2011 by a shortage of vehicles. This effect was worsened, in the second quarter, by supply issues following the tsunami in Japan.

Group operating margin in the first half came to €630 million, or 3.0% of revenues, compared to €780 million or 4.0% in the first half of 2010. The operating margin of Automotive totaled €221 million, or 1.1% of revenues, down €189 million compared to the first-half of 2010. This difference was mainly a result of the higher cost of raw materials, for -€313 million, partially offset by the effect of the cost reduction plan (Monozukuri) for a positive €279 million, a negative currency effect of €102 million,growth in sales volumes totalling €59 million and a mix/price distortion of -€91 million in a competitive European market that was disrupted by supply constraints.

In all, the supply constraints stemming from the Japanese tsunami had an unfavorable impact on the operating margin of Automotive of an estimated €150 million in the first half. The impacts were mainly felt in production, commercial offers and logistics.

The contribution of Sales Financing to the Group operating margin came to €409 million compared to €370 million euros in the first half of 2010. This €39 million increase resulted from higher outstandings and a strong decrease in the cost of risk, which reached an historical low.

In the first half of 2011 Renault reported a net gain of €557 million from the contribution of associated companies, notably Nissan, AB Volvo and AvtoVAZ. Net income came to €1,253 million, and net income Group share totaled €1,220 million (€4.48 per share compared with €2.95 per share in the first-half of 2010).

Automotive operational free cash flow was positive at €121 million, despite an unfavorable change in the working capital requirement of €437 million compared with December 31, 2010 (due in part to an unusual seasonality in stocks linked to supply constraints).

As a result, the Automotive net financial debt fell €214 million on December 31, 2010, totaling €1,221 million at June 30, 2011. The ratio of net debt to shareholders’ equity was 5.3% at end-June 2011 (compared to 6.3% at end-December 2010).

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