Renault drops its target after a weaker first half

PARIS (Reuters) – Renault (RENA.PA) have warned that revenues could decline this year, which will cancel a previous goal, after the first half earnings were affected by falling car demand and the collapse of the partner 's profits. Nissan alliance (7201.T) following the scandal Carlos Ghosn.

Net income declined by more than half, setting in at 970 million euros ($ 1.08 billion) in January-June, as the revenue declined 6.4% to 28.05 billion, announced Friday the French manufacturer. Operating profit also fell 13.6% to 1.654 billion euros.

"Given the deterioration in demand, the group now expects the turnover for 2019 to be close to that of last year," predicts Renault – thus giving up a earlier promise to increase the turnover before the currency effects.

A general slowdown has shaken the sector, raising profit warnings and compounding the challenges facing Renault and Nissan as they struggle to turn the page on the Ghosn era. Their former alliance leader is now awaiting trial in Japan for financial misconduct, he denied.

Renault's net profit was affected by the € 826 million decline in profits of its partner, which was held at 43.4%. Nissan cuts 12,500 jobs worldwide after a collapse in profits it blames on Ghosn's leadership.

However, Renault's performance – reflecting an operating margin down 6.4% to 5.9% – contrasts less favorably with its national rival, the PSA Group (PEUP.PA). The automaker Peugeot has weathered the crisis with a record profit margin of 8.7% unveiled Wednesday.

Renault attributed lower sales in France, as well as in Turkey and Argentina, a 7.7% decline in sales in its main business, the automobile – whose profit margin went from 4, 5% to 4%.

Free operating cash flow also suffered, with a negative result of 716 million euros, with investments rising from 742 million euros to 2.91 billion euros. The company nevertheless reiterated its promises to generate a positive cash flow for the year and a margin close to 6%.