Renault Cautions on Emerging Markets as Earnings Rise

Renault SA reports its operating profit rose 25% to €729 million in the first half of 2014. Unit deliveries climbed 5% to 1.37 million vehicles.

Net income surged to €801 million from €97 million last year, when results were impacted by a writedown on the company's operations in Iran.

Renault attributes this year's first-half improvements to €412 million in cost cutting.

But group revenue for the period fell 3% to €19.8 billion. And automotive operational free cash flow plunged to a negative €360 million from a negative €31 million in the first half of 2013. Renault blames the decline on unfavorable exchange rates and steps by independent dealers to reduce inventories.

Renault's 44% stake in Nissan Motor Co. contributed about €789 million in the first half, but its stake in Russia's OAO AvtoVAZ lost €55 million.

Renault notes that sale growth in Europe offset disappointing volume elsewhere. It expects more of the same for the remainder of the year, as 3%-4% expansion of demand in Europe more than compensates for continuing decline in emerging markets.

The company cautions that Russia's overall car market could shrink 10% or more this year. It also warns of growing uncertainty about demand in Algeria, Argentina, Brazil and Turkey.