PARIS - Renault SA reported a rise in core 1999 profits but forecast lower operating margins for this year.
Renault's operating profits rose by a better-than-expected 14.8 percent to A2.2 billion last year - resulting in a solid rise in its operating margin to 5.9 percent.
But the company signaled that profitability measure would decline in 2000, calling for an operating margin 'on the order of 5 percent of revenues.'
As expected, Renault's bottom line was hurt by hefty charges.
Net profit slid to A534 million from A1.35 billion in 1998, largely due to a A584 million charge related to a five-year early retirement plan and a negative A330 million drag from the company's investment in Nissan Motor Co.
Lehman Brothers analyst Christopher Will, who favors the stock of Renault's domestic rival PSA/Peugeot-Citroen, said the margin forecast reflected a hole in the firm's product cycle.
'We were expecting a mini-profit warning and we got one,' said Will. 'It's not that Renault is selling bad products, but they have come through a golden period and now the shine is coming off a bit.'
Other analysts were more upbeat, saying the results proved Renault's cost-cutting efforts were showing up in core earnings.
'The forecasts for operating margin in 2000 may be a little disappointing, but the underlying message is very positive on cost-cutting, Internet strategy and synergies with Nissan,' said one Paris-based analyst who attended a post-results analysts meeting with Renault Chairman Louis Schweitzer.
Schweitzer said Renault was ahead of schedule in its plan to reduce costs by FF20 billion (A305 million) between 1998-2000, and predicted that total cost savings for the three-year period would rise above FF21 billion.
Geoff Barton and Reuters News Service