BRUSSELS -- Strong sales helped Belgian auto dealer D'Ieteren report a better-than-expected rise in first-half profits on Thursday, but poor results at its Avis Europe car rentals subsidiary knocked its shares.
D'Ieteren's shares reversed early morning gains to drop 3.20 percent to 163.60 euros.
Shares in Avis Europe, 59.7-percent owned by D'Ieteren and Europe's leading car rental agency, fell even further, down more than 14 percent to 69.97 euros.
Avis, which reported results before D'Ieteren early in the day, said underlying net profits fell 25 percent to 4.8 million euros as tough market conditions eroded its operating margin.
It also forecast trading conditions for the rest of 2004 and early 2005 would remain difficult.
Avis Chief Executive Murray Hennessy told Reuters the car rental sector was consolidating but Avis was not a bid target.
ING analyst Jean-Marie Caucheteux estimated Avis's share price fall knocked 4-5 percent off D'Ieteren's value, though the positive results from the rest of the business would compensate.
D'Ieteren's "current" net profit, which excludes amortization and exceptional charges, rose by more than a fifth to 49.2 million euros ($59.4 million) against an average analyst forecast of 41.85 million euros.
It also said it was "increasingly confident" it would meet its full-year target of higher underlying group profit.
Buoyant Belgian car sales bolstered results at its Volkswagen, Audi and Porsche dealerships, where current net profits before exceptionals and amortisation rose 40 percent to 31.4 million euros.
"Group results were broadly in line with expectations ... Bottom line is good, but the operational line isn't fantastic," said Bank Degroof analyst Marc Leemans.
Revenues rose 16.6 percent to 1.727 billion euros, in line with forecasts, but group net profits dropped 9.3 percent to 23.5 million euros due to the cost of ending a share option scheme.
The company said new model launches would help it meet its 18.5-percent market share target for car sales in Belgium for 2005 as a whole, despite failing to reach this in the first six months of the year when most cars are sold.
ING's Caucheteux said the cyclical car sales were good but the car rental business was not showing any improvement.
"Short term it's a good result, but longer term the extra leverage is not there at all," he said. "There was a result better than most had expected. But when you look at the (business unit) breakdown, it was different," he added.
D'Ieteren's Carglass and Autoglass-branded windscreen repair business saw profits rise 13 percent as a result of expansion and lower financing costs.
Despite media speculation that they could be spun off in a share flotation, D'Ieteren said the Carglass and Autoglass brands -- grouped under its Belron unit -- would not be listed in 2005.