Higher unit sales in western Europe in the first half of 2007 boosted operating income at PSA Peugeot-Citroen 21.9% to 2.7% of sales and revenue, which rose 5.9%.

Operating profit was EUR842m, helped by higher unit sales, higher prices and improved product mix.

Announcing results on Wednesday, the automaker said there was a "sharp improvement" in its financial position: EUR1,364m versus EUR116m last 31 December and EUR488m at 30 June 2006.

The ramp-up of the so-called CAP 2010 programme to drive growth and improve competitiveness had delivered "the beginnings of a recovery", with an increase in operating margin led by the automobile division, lower costs, faster improvements in quality and the successful launch of new models - first half roll-outs included the Peugeot 207CC coupe-cabriolet and the smaller five-seat version of Citroen's C4 Picasso MPV/minivan.

"The CAP 2010 programme will have a greater impact in the second half," PSA said.

The Mitsubishi-built Peugeot 4007 and Citroën C-Crosser SUVs, plus the Peugeot 207 SW in July and the 308 in September are among planned H2 debuts.

PSA registered 1,274,500 vehicles in western Europe, compared with 1,265,600 in H1 2006, giving it a 14.2% market share versus 14.0% a year ago and 13.8% in the second half. Sales of assembled vehicles outside western Europe rose 7.2% to 436,600 units.

Automobile division sales and revenue rose 5.1% to EUR24,169m.

Banque PSA Finance reported revenue of EUR975m, up 13.4%. Gefco revenue rose 8.4% to EUR1,797m and Faurecia sales were up 8.9% to EUR6.512m.

Automobile division operating income rose 76.2% to EUR400m, or 1.7% of sales and revenue for the period.

"The strong increase in raw materials prices was offset by new productivity gains in both purchasing and in manufacturing operations," PSA said.

Faurecia's operating income was EUR63m, or 1% of sales, versus EUR85m and 1.4% in first-half 2006.

"The sharp improvement compared with the EUR16m operating loss reported in the second half of last year was attributable to business growth and improved manufacturing performance, which offset heavy losses from operations in North America," PSA noted.

Earnings per share were EUR2.15, compared with EUR1.34 a year earlier.

PSA expects further improvement during the rest of the year, led by demand for its new models.

"This environment should enable the group to further optimise prices, volumes and the product mix," it said.

It expects second-half sales and revenue "slightly up" on H2 '06 results while operating margin should exceed 2% of sales and revenue.

This is because the upcoming new models are in highest-margin segments, despite the continued strengthening of the euro and steadily higher raw materials costs.