French car and truck maker Renault (RNSDF) , (RNLSY) sped down over 3.6% in early trading on Thursday, despite reporting a record first-half operating margin and confirming its full-year guidance for increased revenue, improved operating margin and positive operational free cash flow for its automotive unit.
By mid-morning, the share was still trading down 2.2% at €77.80
Key elements of its success, Renault said, were a new, more expensive range, including the Kadjar sport utility vehicle, as well as higher prices. Renault is introducing 10 new or updated models this year alone.
In first-half results released this morning, Paris-listed Renault said group revenue was up 13.5% year-on-year, at €25.19 billion ($31.3 billion), group operating profit was up 40.6% at €1.54 billion, while automotive operating profit was up 64.9% at €1.12 billion. Net profit for the group was up 7.9% at €1.57 billion.
"The first half results demonstrate the relevance of our strategy," said Renault chairman and CEO Carlos Ghosn. "Success of our new models, our regional diversification and all employees engagement have allowed the group to set a new record for its first half operating margin and to have confidence in the outlook for the full year".
One blemish on the result was the drop the "contribution" from associated companies, mainly Japan's Nissan Motor (NSANF) , (NSANY) and Russia's Avtovaz. Operating profit there was €678 million, down from €895 in the first half of 2015. Although the loss in the Russian unit actually declined, Nissan was hit by an unspecified one-off charge already included in the first-quarter results.
But overall, global car sales set a new first-half record with 1.6 million registrations, an increase of 13.4% on a year earlier, with strong performances in Europe and the Africa, Middle East and India region, despite a 3% decline in the Americas. The problem child was Brazil, although Renault said it increased its share of a declining market there. But sales were up strongly in Argentina after that country reopened its market following the election of a new government there.
And the fall in the share price may have been a case of "buy on hope, sell on reality," as the chip had already done well in advance of the announcement rising 22% from a July 6 low to Wednesday's €79.58 close, as competitors such as Volkswagen (VLKAF) , (VLKAY) , (VLKPF) , (VLKPY) announced strong unit sales volumes in previous days.
In its statement, Thursday, Renault said unfavorable currency impacts from the falling value of the U.K. pound, the Russian ruble and the Argentine peso were more than counterbalanced by strong business growth, lower raw materials costs, higher prices and an improved product mix. And while the Brazilian and Russian markets are expected to decline for the rest of the year, sales in China and India are expected to "pursue their positive momentum".