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Renault cost cuts lift profit

Tuesday, July 29 08:58:36

Renault cost-cutting led to a 25 percent surge in first-half operating profit, the French carmaker said on Tuesday, even as currency headwinds and mounting inventories hurt sales and cash flow.

Operating profit rose to 729 million euros, beating market expectations and lifting the operating margin from 2.9 percent to 3.7 percent of sales - which fell 3 percent to 19.82 billion euros.

"We've seen a significant increase in group profitability," Chief Financial Officer Dominique Thormann told reporters. "The improvement to our margin stems from a very firm cost control."

Renault, whose low-cost cars and emerging-market presence helped ride out a six-year European auto slump, now faces weakening currencies and demand in many of the same overseas markets. But its Dacia-branded budget models are far outperforming a fragile European recovery.

The company is cutting thousands of jobs, mainly in France, as it implements a 2013 union deal in pursuit of a 5 percent margin goal for 2016. Renault last year reduced its domestic workforce by almost 5,600 jobs to 48,550 as of Dec. 31.

The French carmaker raised its European market forecast for 2014, predicting a 3-4 percent expansion instead of the 2-3 percent previously expected.

But automotive free cash flow worsened to a negative 360 million euros from a year-earlier deficit of 31 million as the group's inventories increased to 158,000 unsold vehicles from 100,000.

Net income, which had been blighted by a 511 million euro writedown on Renault's Iran business a year earlier, rose to 801 million euros from 97 million. (Reuters)

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