PSA first-half profit jumps on vehicle pricing, Opel synergies

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PARIS — PSA Group delivered a big increase in first-half profit, as new models and the integration of Opel-Vauxhall more than made up for weaker emerging-market sales.

Recurring operating income at the automaker rose 11 percent to 3.34 billion euros ($3.7 billion), lifting its operating margin to a new record of 8.7 percent in the first half, PSA said in a statement.

“Our results are proving the sustainability of our performance despite the weakness of global markets,” CFO Philippe de Rovira told reporters on Wednesday.

“These headwinds were more than compensated by our efficiency and continuous efforts to save costs,” he Rovira said.

“This is a hugely impressive result,” Evercore analyst Arndt Ellinghorst wrote in a note, adding that PSA is now the benchmark for margins of premium brands, he said.

Mainfirst analyst Pierre-Yves Quemener  said PSA will not escape cyclical downturn and compliance headwinds. “We still see margins declining through 2021,” he said.

The profit gain came despite a 13 percent drop in global sales announced earlier this month, as emerging markets weighed on PSA’s overseas business.

Revenue fell by a more modest 0.7 percent to 38.3 billion euros, as new models such as the Citroen C5 Aircross and a trio of commercial van launches helped to lift pricing.

Net income jumped 24 percent to 1.83 billion euros for the first half, according to the automaker, which acquired the Opel-Vauxhall business from General Motors in 2017.

Much of the operating-cost improvement stemmed from steady integration of the vehicle technologies and architectures underpinning new models across the Peugeot, Citroen, DS, Opel and Vauxhall brands.

PSA joined rivals in confirming vehicle demand is slowing, predicting a 1 percent decline in Europe and a 7 percent contraction in China this year.

PSA’s bottom-line improvement came despite a 302 million-euro hit from China that included a 139 million asset writedown reflecting a steady plunge in the group’s sales — down another 61 percent in the first half.

PSA will try to turn around business in China, where it has so far failed to entice customers with models that proved ill-adapted. PSA is working on reducing its capacities in the country, possibly by renting out facilities, de Rovira said.

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