Peugeot Citroen shares jump on strong results

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Shares in the French auto group jump after the group reported a 49-percent surge in net profit for the first half of 2008.

23 July 2008

PARIS - Shares in French auto group PSA Peugeot Citroen jumped 8.45 percent in initial trading on Wednesday on unexpectedly strong quarterly profits and the fall of the price of oil.

The group reported a 49-percent surge in net profit for the first half of the year to EUR 733 million.

The price of the shares surged to EUR 34.65, far exceeding a 1.28-percent rise of the overall CAC 40 index.

In the first half, global sales rose by 4.6 percent to 1.845 million units.

The improvement in the results arose mainly from a programme to increase competitiveness called Cap 2010, the group said.

This had contributed EUR 882 million to operating profit, offsetting increased material, labour and foreign exchange costs of EUR 461 million, and research and development charges.

The group said it expected "a sharper slowdown" of its markets in western Europe, forecasting they would decline by about 4.0 percent in the whole year.

However, it expected its target markets in China, Russia and the Mercosur Latin America area to grow by about 15.0 percent.

But an analyst at Credit Mutuel-CIC brokers, Igor Pruniaux, said that although the results were good for the share price, they were unlikely to "remove concerns in coming months".

He said that the group's target of an operating profit margin equivalent to 3.5 percent of sales for the whole of the year was "hard to sustain on the basis of the first half".

This was because seasonal sales factors were less favourable in the second half, and a high level of stocks would weigh against the group as European markets continued to deteriorate and the price of oil remained high.

However, in the short term, the group benefited from a fall in the price of oil of nearly 20 dollars per barrel since a peak of 147.27 dollars on 11 July.

The group reported a 32.4-percent rise in current operating profit from the equivalent figure last year to EUR 1.115 billion from EUR 842 million, yielding an improved margin of 3.6 percent from 2.7 percent.

The group stood by its margin target for the year and by a forecast that sales would rise by about 5.0 percent to 3.55-3.65 million vehicles.

[AFP / Expatica]

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