PSA’s 1H profit jumps on more expensive cars

PARIS • The French maker of Peugeot, Citroen and DS cars shrugged off the woes hanging over its German rivals as cost cuts and a revamped lineup of pricier models lifted profits and boosted shares to the biggest gain since April.

PSA Group’s recurring operating income rose to €2.04 billion (RM10.15 billion) in the first-half (1H) from €1.83 billion a year earlier, the company said in a statement yesterday. Revenue advanced almost 5% to €29.2 billion, beating the average of five analyst estimates compiled by Bloomberg.

“We improved the performance of all our divisions,” CFO Jean-Baptiste de Chatillon said on a call with journalists. 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, he said.

CEO Carlos Tavares is counting on new models, international expansion and the acquisition of General Motors Co’s (GM) European operations. While the Paris-based manufacturer is struggling in China, where sales of its cars almost halved since the start of the year, the recurring operating margin at the auto division grew to a record 7.3% of revenue from 6.8%.

PSA shares rose as much as 6.1% in Paris trading, the most since April 24, and were up 5.1% to €19 by 12:32pm yesterday.

The mix of high-end to mass-market models was the largest contributor to the jump in operating income at the auto division, adding €456 million, de Chatillon said. Peugeot, Citroen and DS all increased their average prices, according to an investor presentation.

Europe’s second-biggest carmaker is acquiring the Opel and Vauxhall brands from GM to gain scale in its home continent. The companies are on track to close the deal before the end of the year, with authorisation still pending for Opel bank, the CFO said. Global unit sales rose 2% in the 1H, the company reported earlier this month. Excluding Iran, where the automaker created joint ventures to re-enter the country, deliveries of PSA’s vehicles fell by more than 10%.

As the UK government is joining France in planning to ban sales of diesel and petrol-fuelled cars by 2040, effectively favouring electric vehicles,theprice of batterypowered cars remains “a huge challenge”, Tavares told analysts. Western governments won’t be able to sustain sales with subsidies once electric vehicles become more common, he said. In the investor presentation, PSA reiterated plans to make 80% of its vehicles available in electric versions by 2023. — Bloomberg