Renault sales hit as customers await new models

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PARIS (Reuters) - French carmaker Renault said on Friday its sales fell 2.7 percent to 10.256 billion euros (7.0 billion pounds) in the first quarter as customers put off buying cars until the launch of new models.

The average forecast of 10 analysts in a Reuters poll was 10.227 billion for sales, with forecasts ranging between 9.7 billion and 10.645 billion.

A company official said the decline was because customers were waiting for the launch of 26 new models by 2009. The fall came despite a 26.9 percent spike in sales of its no-frills Logan model.

"Customers are holding back, waiting for the new models," he said. "It hurts at the moment but it will get better."

A new compact Twingo and a luxury Laguna model are due later this year and a new version of the high-volume Megane is due out in June.

On Thursday, domestic rival PSA Peugeot Citroen said its sales in the quarter rose 6.5 percent to 14.87 billion euros.

Renault shares slipped 0.3 percent to 97.54 euros at 9:52 a.m. British time, while Peugeot's rose 1.4 percent to 59.34 euros.

The official said the company was on track to meet its profit targets, which include a 3 percent operating margin for 2007 after it fell to 2.56 percent in 2006, and added the sales decline was in line with its expectations.

"While we believe (Chief Executive Carlos) Ghosn can achieve the target, it is an uphill struggle in our view as product launches in 2007 are either low margin (Twingo) or low-volume (Laguna)," said analyst Stephen Cheetman of Sanford Bernstein.

He added the stock appeared fully valued at current levels. and rated it market-perform, with a target price of 91 euros.

The company official said a cost-cut programme was advancing, the purchase of joint parts with alliance partner Nissan was increasing, and the Logan models were selling at a good profitability per car.

The automobile division's sales fell 2.8 percent to 9.778 billion euros. In Europe, sales dropped 8.5 percent in spite of a slight improvement in revenue per unit, but sales outside Europe grew 9.1 percent.

Renault said the sales growth outside Europe could not compensate for the decline.

Outside Europe, the group benefited from favourable international volumes thanks to the success of its Megane and Logan models, as well as an improved price mix.

There was an increase in parts -- mainly engines -- and vehicle sales to partners, in particular in the commercial vehicles segment and with the start of SM3 exports from the Renault Samsung subsidiary in Korea on behalf of Nissan in which Renault has a 44 percent stake.

Merrill Lynch analyst Thomas Besson said he continued to prefer shares in Renault over Peugeot for the next 12 months, primarily on a relative valuation basis and a better visibility on strategy and targets.

Reuters