PARIS - Renault achieved record profitability in the first half as emerging-market sales surged, enabling it to shrug off challenges caused by adverse foreign exchange rates.
Operating profit rose 5.2 percent to 1.914 billion euros ($2.23 billion) for an all-time high profit margin of 6.4 percent, up from 6.2 percent, Renault said in a statement on Friday.
Revenue increased 1.4 percent to 29.99 billion euros. Higher raw material costs weighed on net income, which fell 16.3 percent to 2.04 billion euros, also burdened by a restructuring charge of about 150 million euros, as well as a weaker U.S. dollar, Argentinian peso and Brazilian real currencies.
The negative currency effects led to a 0.5 percent decline in automotive revenues, which dipped to 26.87 billion euros despite pricing improvements.
Renault said earlier this month that first-half vehicle sales had risen 9.8 percent to an all-time high of 2.07 million, helped by rebounding markets in Russia and South America.
CEO Carlos Ghosn said the margin high was a result of Renault's "strategy of regional diversification."
Renault reiterated its outlook for the year of raising group revenue and maintaining a return on sales above 6 percent. For the rest of the year, possible headwinds include new EU emissions testing standards, finance chief Clotilde Delbos told analysts and reporters on an earnings call.
The new test standards continued to add "uncertainty" to the second-half outlook, Delbos said. The company declined to quantify the effect of any disruption.
Mercedes-Benz maker Daimler and French supplier Valeo have both warned of an earnings hit from the new Worldwide harmonized Light vehicle Test Procedure (WLTP) standards taking effect in Europe in September.
Chief Operating Officer Thierry Bollore said there is "still some work to do" for Renault to meet vehicle certification deadlines but the company did not expect the issue to have any significant negative impact on its business. He said all certifications would be completed by mid-August.
Iran sanctions hit
Renault's financial position in Iran -- the company's eighth-largest market, with more than 160,000 sales in 2017 -- has been hit by new U.S. sanctions against the country.
Delbos said Renault expected "almost zero" sales in Iran and shipments of knockdown kits in the second half as the new sanctions began to bite. Renault has no recent Iran investments to write down, she said.
CEO Carlos Ghosn had targeted a 15 percent market share and sales of more than 250,000 units in Iran by 2022, but those plans are now in jeopardy. Renault said in August 2017 that it would set up a joint venture with Iranian partners to produce an additional 150,000 vehicles a year. Iran state media valued the deal was valued at 660 million euros.
"We don't want to abandon Iran," Ghosn said in June, adding that Renault had been in contact with U.S. officials. "We can’t put Renault in peril, however."
Bollore indicated that Renault was following the lead of PSA Group and other companies that are halting activities in Iran. "As we comply fully with U.S. sanctions, it's likely that our development will be put on hold," he said.
Renault saw a slowing in growth of sales to partners - including diesel engines to Mercedes maker Daimler - and a lower share of profit from Nissan, which is losing ground in the U.S. market. The Japanese carmaker's contribution dropped 38 percent to 805 million euros.
Reuters and Bloomberg contributed to this report