PARIS -- French auto maker Renault SA raised its 2004 profit target yesterday, emboldened by better-than-expected first-half results as motorists snap up its mid-sized Mégane line of cars.
Europe's fourth-largest auto maker lifted its full-year operating margin target by one point to 5.5 per cent of sales, up from 3.7 per cent in 2003, based on current exchange rates, and said profit would rise accordingly.
First-half profit jumped 28.5 per cent to 1.51 billion euros ($2.4-billion), above a Reuters consensus forecast of 1.41 billion and buoyed by a big dividend from the company's 44.4-per-cent owned Japanese partner, Nissan Motor Co.
Renault stock, currently a market darling that has outperformed its European peers this year, jumped 5.6 per cent to 64.60 euros, and analysts said they expected a flurry of rating upgrades.
"These are excellent results," said Patrice Solaro at Kepler Equities. "A market rebound helped, and cost-cutting efforts over the past two to three years are bearing fruit."
The company's operating profit more than doubled to 1.28 billion euros, compared with expectations of 958 million, hitting levels not seen since the company's heyday in the late 1990s.
Sales rose 11 per cent to 20.76 billion euros, yielding an operating margin of 6.1 per cent.
"These results are much better than market expectations and our own," Renault chairman Louis Schweitzer said. "In this context we think it is legitimate to revise our full-year target up by one point, making it the best operating margin among European manufacturers."
Approximately one-quarter of the jump in operating profit was driven by better margins outside Western Europe, where business is now in the black, after barely breaking even last year.
Cost cuts, higher sales in recovering markets and a better product mix, as it sold more of its lucrative Mégane range, also swelled profits, Mr. Schweitzer said.
Renault's core profits and sales had stalled in recent years as its lineup aged alongside flashier new offerings from rivals. But it has bounced back over the past year thanks to its love-it-or-hate-it mid-sized Mégane range, which includes the hit Scenic minivan.
Renault's growth underscored the strength of French auto makers compared with their major European rivals.
PSA Peugeot Citron SA weathered a new-model drought and a tough home market in better-than-expected fashion, limiting a drop in first-half profit and giving hints that it could also raise its full-year targets.
By contrast, German giant Volkswagen AG posted weak first-half earnings and slashed its 2004 target, while the auto unit of Italy's Fiat SpA saw its operating loss widen in the second quarter.
