Peugeot-Citroen expects further profit growth

French automaker PSA Peugeot-Citroen said Wednesday first-half earnings rose 60 percent on rising demand , better pricing and the rollout of new models.

Photo: Peugeot-Citroen expects further profit growth

Europe's second-largest car maker after Volkswagen AG said it increased its share of the European market and expects "continued improvement" through 2007 led by demand for new models such as the Citroen C4 Picasso and the Peugeot 207 - Europe's fastest selling car.

Peugeot-Citroen reported a first-half net profit of EUR 492 million (US$680.58 million), up from EUR 306 million (US$423.29 million) a year earlier. First-half revenue rose 5.9 percent to EUR 30.82 billion (US$42.63 billion).

Operating profit came in at EUR 842 million (US$1164.74 million), up from EUR 691 million (US$955.86 million) a year before. The operating margin was 2.7 percent compared with 2.4 percent in the first half of 2006.

The company did not break out separate second-quarter results.

The earnings beat analyst forecasts. A poll by Dow Jones Newswires had predicted net profit of EUR 323.8 million (US$447.91 million) on sales of EUR 30.35 billion (US$41.98 billion). Analysts also estimated an operating margin of 2.4 percent.

Peugeot-Citroen's fortunes have ebbed in recent years as a weak product lineup and fierce competition from Asian manufacturers have caused its share of the key European market to fall to just over 13 percent, from a record of 16 percent in 2002.

The company said Wednesday its share of the European market rose to 14.2 percent from 14 percent a year ago, with 1,274,500 registrations.

Operating income at its automobile division rose 76 percent to EUR 400 million (US$553.32 million), boosting operating margin - a closely watched indicator of the company's financial health - to 1.7 percent of sales from 0.8 percent a year ago.

New CEO Christian Streiff - who joined the company last year after a brief 99-day stint at the helm of planemaker Airbus - detailed a major turnaround plan in May.

The program, known as CAP 2010, aims to reduce the company's fixed costs by 30 percent, speeding up the development time for new models and improving operations not directly related to production. The company said the measures will have a "greater impact" in the second half.

As the year progresses, Peugeot-Citroen said sales in the second half will be "slightly up" on the year-earlier period thanks to the launch of new, higher-value models.

Peugeot-Citroen has announced plans this year to reduce its work force in France by 4,800 employees, offering incentives to avoid forced layoffs.

Shares in the company fell 1.1 percent to EUR 64.90 (US$89.71) in early trading Wednesday in Paris.