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Renault Revenue Falls 2.7% on Lower European Sales (Update3)

From bloomberg| April 28 , 2007

Renault SA, France's second-largest carmaker, said first-quarter revenue fell 2.7 percent on lower sales in Europe.

Revenue dropped to 10.3 billion euros ($13.9 billion) from 10.5 billion euros a year earlier, Renault said in a statement today. Automobile division sales declined 2.8 percent to 9.78 billion euros.

``It's more of the same: a huge volume drop in Europe and better elsewhere,'' said Philippe Houchois, an analyst with JPMorgan Chase & Co. who has an ``overweight'' rating on the stock. ``At the same time, the performance outside Europe was not as good as we've seen recently.''

Renault plans on the introduction of the new Twingo small car and Laguna midsized models later this year to reinvigorate demand at home. The introduction of the no-frills Logan sedan in Brazil, Iran and India this year is expected to boost foreign sales.

Global sales fell 3.8 percent to 597,600 vehicles in the quarter from 621,400 a year earlier, led by a 8.5 percent decline to 417,200 units in Europe, Renault said. French sales fell 9.5 percent to 160,400 vehicles.

Unlike larger compatriot PSA Peugeot Citroen, which recently launched two new models, Renault has so far failed to improve European sales to compensate for slowing growth overseas. Peugeot said yesterday its first-quarter revenue rose 6.5 percent to 14.87 billion euros on global sales of 826,100 vehicles, up 0.5 percent.

Product Cycle

``In France and Europe, the decline in sales is mainly linked to the product cycle,'' Renault said. Revenue from its sales financing division fell 0.6 percent to 483 million euros.

Shares of Renault, which have risen 6.1 percent this year, fell as much as 1.46 euros, or 1.5 percent, to 96.40 euros. They were down 0.5 percent at 10:13 a.m. in Paris, while Peugeot was 83 cents higher at 59.36 euros after rising as much as 2.4 percent.

Renault's quarterly revenue beat the 10.2 billion euros expected by investors, according to the median estimate of five analysts surveyed by Bloomberg News.

Chief Executive Officer Carlos Ghosn said in February that operating profit would equal 3 percent of sales in 2007, from 2.6 percent last year, as Renault pursues objectives including a 6 percent margin and over 3.3 million vehicle sales in 2009.

Although the company's statement gave no new guidance, Chief Financial Officer Thierry Moulonguet told analysts on a conference call that the quarterly performance ``increased confidence'' in the full-year objective, JPMorgan's Houchois said.

Renault said yesterday that its 44 percent-owned affiliate Nissan Motor Co. will add 372 million euros to its bottom line in the first half, 38 percent less than the year-earlier contribution.

The announcement came after Nissan reported a 46 percent decline in quarterly profit and postponed key sales objectives by a year.

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