Renault Net Drops, European Indexes Down

123jump.com Staff
12 Feb, 2009
New York City

Weakness in autos and banks dragged markets in Europe. DAX index dropped 2.7% and CAC 40 index declined 2.1%. Volkswagen plunged 7% after the U.S. stimulus watered down the subsidies to the auto sector. Renault reported a sharp decline of 78% in earnings on 4.1% decline in sales.

[R]1:00PM New York, 6:00 Frankfurt – Car makers decline in Europe. Renault plans to cut inventories and capital investments.[/R]

Auto manufacturers in Germany fell on weakening global car demand and growing concern that the US economic stimulus plan is now too watered down to induce new car purchases. Financial institutions in France also closed on the downside.

The U.S. Congress trimmed tax breaks for the auto industry reigniting worries that sales for the industry may not recover in 2009. The global market for cars contracted 5% in 2008.

Volkswagen AG, the largest automaker in Germany and in Europe plunged 6.9%. Daimler declined 2.1%. Renault, France’s second largest carmaker, also fell in France trading after it reported a 2% decline in net income for 2008.

Market sentiment

In Frankfurt trading the DAX Index lost 2.7% or 122.53 to 4,407.56. Of the 30 index shares, 6 gained and 24 declined.

Deutsche Bank led advancers with a gain of 2.8% followed by gains in BMW of 2.1%, in Deutsche Post of 0.8%, Fresenius Medical of 0.6% and in Deutsche Telekom of 0.4%.

Volkswagen led decliners with a loss of 6.4% followed by losses in Infineon Tech of 4.9%, in Man of 4.1%, in RWE AG of 3.7% and in Commerzebank of 3.5%. Morgan Stanley downgraded Commerzbank from “equal weight” to “underweight.”

In Paris the CAC-40 Index lost 2.09% or 63.48 to 2,964.34. Of the 40 index shares only two gained.

Peugeot gained 2.9% and Total, Europe’s third largest oil company added 0.5%. Total reported fourth quarter profit for 2008 declined 6.5% to 2.9 billion euros. The earnings surpassed forecasts. However, the company looks to increase production in its projects in Africa and Canada.

CAP Gemini led decliners with a loss of 9.1% followed by losses in EDF of 7.5%, in BNP Paribas of 5.5%, in Alcatel-Lucent of 4.9% Credit Agricole of 4.8%.

EDF, Europe’s biggest power producer, reported that full-year earnings for 2008 fell 39% to 3.4 billion euros. The company said it will sell assets to reduce its debt.

Fortis shareholders yesterday blocked the Belgian government from selling the bank’s Dutch arm to BNP Paribas. Belgian government owns 41% of Fortis.

Earnings news

Renault, France’s second largest carmaker, reported that net income fell 2% to 599 million euros in 2008 compared to 2,734 billion euros the previous year.

Earnings also declined 78% from 10.32 billion euros in 2007 to 223 million euros in 2008. Renault’s worldwide sales fell 4.1% to 2,382,000 units. However, the group’s world market share increased 3.6%.

In Europe, the group’s sales fell 7.2% to 1,507,228 units. Sales declined steeply in Spain Italy and the UK. Outside Europe, sales grew moderately.

Renault forecasted further weakening in market conditions. The group revealed it will introduce measures to control working capital by reducing inventories, reduce total investments by 20% in 2009, cut fixed costs, including salaries and seek a synergy with Nissan in Japan.