Renault's first half net profit fell 20 percent

French carmaker Renault SA said Wednesday that its first-half earnings fell 20 percent as car sales in Europe dropped and the contribution from Japanese affiliate Nissan Motor Co. shrank.

Net profit fell to EUR1.32 billion (US$1.79 billion) from EUR1.65 billion (US$2.27 billion). Sales fell 1.4 percent to EUR20.56 billion (US$28.26 billion) as the number of vehicles sold decreased 3.7 percent. The fall was led by a 9.1 percent plunge in the European market.

The results are in line with analysts' forecasts. A poll by Dow Jones Newswires had forecast net profit at EUR1.31 billion (US$1.81 billion).

The operating margin rose to EUR722 million (US$992.24 million) or 3.5 percent of revenues compared with 2.8 percent a year earlier and analyst expectations of 3.1 percent. Renault attributed the gains to cost controls and sales outside Europe.

Operating profit at Renault's automobile division - a key indicator of the company's financial health - improved to 2.3 percent from 1.6 percent a year ago.

Chief Executive Carlos Ghosn is trying to turn Renault and Nissan around with the launch of new models. Last year, he called 2006 a "year of transition" and introduced a target of a 3 percent operating margin for 2007.

Renault confirmed Wednesday it is sticking with this target.

Ghosn is pinning his hopes on the rapid expansion of the low-cost Logan sedan - launching this year in India, Iran and Brazil - as well as the launch of a new Twingo super-mini and Laguna upscale sedan in the final quarter.

Nissan, which is also headed by Ghosn, said Tuesday its April-June quarter profit fell 16 percent because of higher material costs and a shift among consumers away from trucks and other vehicles that deliver heftier profits. Renault owns 44 percent of Nissan.

Ghosn said the Tokyo-based automaker promised revival with models that have rolled in showrooms recently, such as the Altima and Infiniti G35, and more models in the pipeline. Nissan is launching 11 new global products this year.

Renault shares closed down 3.5 percent at EUR108.10 (US$148.56) in Paris.

The French car-maker's cross-town rival PSA Peugeot-Citroen fared better. The company said Wednesday that first-half earnings rose 60 percent on rising demand, better pricing and the rollout of new models.

Peugeot-Citroen reported a first-half net profit of EUR492 million (US$676.16 million)and an operating margin of 2.7 percent