PARIS - Nissan's spectacular return to profit in the first half of fiscal year 2000 has bolstered analysts' expectations that it will soon become a major contributor to Renault's own bottom line.
On October 30, barely 18 months after being rescued from the brink of bankruptcy by the French company, Nissan announced a E1.8 billion net profit for the six months to September 30, in what it described as its best results in 10 years.
This will add about E 375 million to Renault's second-half results - the two companies' reporting calendars don't coincide.
Renault took a controlling stake of 36.8 percent in the debt-laden Japanese company in March last year as part of its bid to become a global car company.
Nissan's financial impact on Renault's overall 2000 accounts will be negative by about E14 million because of earlier losses, says Beatrice Foussat-Thomas, an analyst with Natexis Capital.
But as early as 2001, she expects Nissan to contribute E350 million to Renault's profit of about E1.56 billion - or nearly a quarter of the total.
Will this return to profitability prompt Renault to raise its stake in Nissan? Under the agreement signed last year at the time of the takeover, Renault cannot increase its shareholding to more than 39.9 percent until 2003, when it can boost it to 44.4 percent.
For now, the priority is to forge closer ties on the operational rather than on the financial side, analysts say.
'The focus is on getting to know each other better, on creating common platforms and rationalizing the distribution network in Europe,' said Georges Dieng, an analyst with ABN-Amro.
Besides, Dieng said, if Renault increased its stake in Nissan to more than 40 percent, the French company would be required by reporting rules to incorporate Nissan's debt into its own accounts, weakening its financial ratios.
Even now, Nissan's E12 billion debt makes some investors nervous, prompting Renault Chairman Louis Schweitzer to reaffirm that the company's 'balance sheet is sound.'