Peugeot turnaround leads to profit

File photo: Peugeot.

File photo: Peugeot.

Published Jul 30, 2015

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Paris - After years of loss-making, PSA Peugeot Citroen is now back in the black well ahead of schedule.

The French carmaker has announced a return to profitability in the first half of the year with a net profit of 571 million euros (R7.93bn), sending its share price soaring.

The group had posted a 114 million euro loss in the first half of 2014.

Analysts at Morgan Stanley called the group's first positive semester since 2011 “very impressive”given the industry's tight margins, saying Peugeot had benefitted from its restructuring efforts and favorable exchange rates.

The turnaround comes a little over a year after Carlos Tavares, former number two at rival Renault, took the helm when PSA was on the brink of bankruptcy.

In April 2014, the French state and Chinese auto group Dongfeng each took a 14 percent stake in the family firm in exchange for a 3.0 billion euro capital injection.

THE SECRET TO SUCCESS?

The group attributed the growth to a “positive product mix” and favorable exchange rates.

Turnover was also up 4.7 percent to 28.9 billion euros, of which the automotive division accounted for 19.4 billion euros.

Tavares said Peugeot was “a little ahead” with its plan to return to profitability dubbed “Back in the Race”, launched in 2014.

“Even if we are a little ahead with our plan, we think we need to stay focussed. The more we see adverse winds coming... the more we are persuaded that we must stay very focussed until the end of this plan's implementation,” he said in a conference call with investors.

Financial director Jean-Baptiste Chatillon, for his part, said the slowdown in China - the group's biggest market - was of concern.

“The Chinese market is in the midst of a transformation,” he said. “We will adapt to it. It's certainly an important thing to watch... but it is certainly not an obstacle to the plan.”

The group is banking on 6.0 percent growth in the European auto market and 3.0 percent growth in China, while declines of 15 percent and 35 percent are expected in Latin America and Russia respectively.

AFP

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