Why The Markets Are Unimpressed With Renault’s Profit Surge
Industry News
You would think any blue chip, stock market listed, corporation posting profits would be enough to make investors delighted. That’s not how the markets work, invesment analysts are able to look through the headlines and actually work out what the numbers mean. For the first half of 2015 Renault’s profits surged, but the long term outlook is clouded under long term investor fog. Renault’s operating margin rose to its highest rating in 10 years but the 4.8 percent increase saw its share price fall by 8.3 percent. The problem is Peugeot’s fault. More to the point in the same period Peugeot has seen a dramatic turnaround in its operational management by 5 percent which is the holy grail for automotive operating margins. What that means is Renault is losing money within a inefficient manufacturing quagmire and this hurts the long term recovery of the brand because money will have to be spent on improving these inefficiencies. Still Renault’s net income rose dramatically, an 86 percent rise, which equates to 1.4 billion euros for the first six months of 2015. A weak Euro and recovery within its home market  were also contributory factors. Naturally Renault’s operating profits were boosted to the tune of 1.07 billion euros, up from 709 million euros for the previous year. However discounts at retail forecourts wiped off 283 million euros from the balance sheet. However Renault has invested heavily in Russia and Latin America, growth in Europe offset losses in those regions, Europe contributes to 62 percent of Renault’s sales. The association with Russia’s AutoVaz cost Renault 70 million euros in losses. Renault’s goal of reaching a 5 percent operating margin has been pushed back by one year to 2017 due to a longer than expected roll out of new vehicle products. In comparison Peugeot face near bankruptcy last year and has bounced back that 5 percent operating margin of health. And that’s why the markets are unimpressed with Renault. Operating margins really means cost cutting and with all the alliances Renault has, Nissan and Daimler, analysts believe Renault should have performed a lot better.  City-Traders
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