New models pull Peugeot Citroen out of doldrums with profit surge

July 26, 2007 - 0:0

PARIS (AFP) -- French carmaker PSA Peugeot Citroen announced a 60.8-percent leap in first-half net profit on Wednesday, saying that new models and productivity had boosted sales and countered a rise in raw material prices.

New Chief executive Christian Streiff told a news conference that the results marked ""the first six months showing recovery after five years of continual slump."" The group, which had reported an 82.9-percent slump in net profit for the whole of last year and has complained that strength of the euro was crimping performance, said comeback had been carried largely by renewal of its models. Peugeot Citroen had forecast recovery as it renewed its ageing range of products, and in the first six months of this year net profit leapt by 60.8 percent to 492 million euros (679 million dollars). This was far greater than the rise of sales, amounting to 5.9 percent from the equivalent figure last year, to 30.818 billion euros. In mid-morning trade Peugeot Citroen shares had followed the Paris market downwards, losing 1.59 percent to 64.55 euros, on an overall market which was 0.83 percent lower, after what one dealer termed as ""good results, but cautious forecasts"". Current operating profit was 842 million euros from 691 million euros, to show an operating margin of 2.7 percent of sales compared with 2.4 percent last time. The group said it expected sales in the second half to grow slightly faster than in the second half of last year and the operating margin to be slightly more than 2.0 percent of sales. Streiff had said that specific forecasts would be provided for 2007 when the first-half results were announced, but no such figures were provided on Wednesday. In the whole of last year, the operating margin, the difference between costs and sales by the daily operations of the business and a vital indicator of overall profitability, had been 2.0 percent of sales compared with 3.4 percent in 2005. In the second half of last year, the operating margin fell to 1.6 percent. For 2006 as a whole, net profit covering all financial operations of the business, had slumped by 82.9 percent to 176 million euros under pressure from a rise in raw material costs and competition for the group's established products from Asian carmakers. The company said on Wednesday that the target for the second half would be achieved ""thanks to the launch of new models in the sectors which contribute most (to results)"" and ""despite another rise of the euro and of raw materials prices"". A rise of the euro tends to increase the price of European products on foreign markets. The cost of raw materials had been countered by gains in productivity but the results had been set back by 291 million euros owing to exceptional write-downs of some assets and provisions for the voluntary departure of 4,800 employees, announced in April. Other costs had arisen through restructuring at its car parts group Faurecia