PARIS — French car maker Renault said on Friday it had increased first-half profitability at its core manufacturing division despite falling sales, riding out Europe’s sustained market slump with new models and a firm hand on costs.

While the bottom line was weakened by lost business in sanctions-hit Iran, incurring a €512m charge, operating profit before one-off expenses rose 15% to €583m. Revenue fell 0.9% to €20.44bn.

Renault shares rose after the company reaffirmed full-year goals including a positive car division operating margin and cash flow.

“We’re on track to achieve the objectives we announced for 2013,” CE Carlos Ghosn said.

A collapse in European car demand has led to crippling price wars and excess capacity, wiping out manufacturers’ profits and in some cases threatening their survival.

Unlike struggling domestic rival PSA Peugeot Citroen, Renault is shielded from the worst of the crisis by its 43.4% stake in Nissan, as well as a timely push into low-cost cars and emerging markets.

Renault shares rose as much as 5.4% to €62.88 and were up 4% at 7.17am GMT.

“There’s been a great deal of uncertainty in the market about whether Renault would confirm its full-year guidance,” London-based Citi analyst Philip Watkins said in a note.

Mr Watkins credited tight discipline on pricing and costs for what he described as “surprisingly strong results from Renault”.

Net income dropped to €39m from €734m, weighed down by €832m in charges, but the car division’s operating margin rose to 2.9% from 2.5%.

The group’s main Renault brand, challenged in recent years by cheaper offerings including its own no-frills Dacia cars, is fighting back to lift pricing with new models such as the latest Clio subcompact and Captur mini-SUV.

The effort helped offset a “difficult environment” in Europe and exchange-rate headwinds in Latin America, chief financial officer Dominique Thormann said.

“We’ve been able to compensate by raising prices,” he said.

Car division earnings almost doubled to €211m or 1.1% of sales, from €116m and a 0.6% margin. Divisional cash-burn was also reduced to €31m from negative cash flow of €207m a year earlier.

US-led sanctions led to a 47% plunge in Iranian sales — to 28,000 semi-assembled vehicles — and were tightened further in June, prompting the €512m write-down.

“This provision corresponds to the value of our assets (in Iran), essentially cash that we can no longer repatriate,” Mr Thormann said. Renault has no manufacturing facilities in the country.

Profit took another dent from the bankruptcy of Better Place, an electric-car infrastructure startup that had ordered 100,000 of the French car maker’s Fluence battery cars.

Renault took an €85m charge to compensate suppliers to the Fluence programme — which also claimed an unspecified share of the additional €142m in write-downs announced for three underperforming vehicles.

Reuters