PSA hits first-half profit record as pricing prevails

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Reuters
July 26, 2017 08:37 CET

PARIS — PSA Group increased sales and profit in the first half, the maker of Peugeot, Citroen and DS cars said, with a new profitability record at its core manufacturing division.

Net income rose 3.6 percent to 1.26 billion euros ($ 1.46 billion) on a 5 percent increase in revenue to 29.2 billion euros, the automaker said on Wednesday in a statement, as stronger pricing more than made up for weaker sales volumes in Europe and China.

PSA rebounded from near-bankruptcy and a government-backed bailout in 2014 to an industry-leading automotive profit margin last year on the strength of cost-cutting, a pared-down lineup and determined efforts to lift prices.

The core automotive operating margin jumped to 7.3 percent from 6.8 percent, setting a “new historic high” for the Paris-based carmaker.

The automotive unit “delivered a performance level that more than compensated for headwinds” including lagging Chinese sales, currency effects resulting from Brexit and rising raw material costs, Chief Financial Officer Jean-Baptiste de Chatillon said on a call with journalists.

“We are now in position to deliver recurrent profitability,” Chatillon said. “There are always headwinds, but we are able to withstand them while maintaining a high level of profitability.”

Weaker first-half vehicle sales in Europe and a sharper slowdown in China had sparked concerns about the pace of PSA’s recovery just as it prepares to acquire Opel from General Motors, in a deal closing later this year.

PSA said its market-share decline – particularly in Europe – wiped 92 million euros from profit. Higher raw-material costs trimmed a further 129 million and currency effects 255 million.

But its product mix added 456 million euros and pricing another 41 million – both helped by a flurry of new model launches. Market growth also contributed 178 million euros.

PSA raised its full-year European auto-market growth forecast to 3 percent from 1 percent and its Latin American and Russian growth forecasts to 5 percent – from 2 percent and flat, respectively.

Bloomberg contributed to this report

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