PSA Peugeot Citroen has reported a decline in profitability for 2005, in line with warnings earlier this year.

Behind the top line figure of a 0.3% increase in net sales and revenue in 2005, totaling EUR56,267m, lay a 0.4% decline in sales and revenue in the automobile division. The other group companies - Gefco, Banque PSA Finance and Faurecia - reported revenue increases.

Automobile division operating margin totalled EUR916m compared with EUR1,503m in 2004. The decline was attributed to lower global production (3,375,500 in 2005 compared to 3,405,100 in 2004).

Sales worldwide increased slightly from 3,375,300 in 2004 to 3,390,000 last year but revenue was hit by competitive pricing in Europe. Raw material price increases and the cost of Euro IV emissions compliance were also cited as reasons for the profit drop. These are likely to have a continued impact on PSA's operating margin in the first half of 2006.

For 2006, the group expects the European market to remain flat but, by being at a better stage in its model range life cycle, it should be able to grow sales.

The all-new Peugeot 207 will be launched next spring, and several new models will be in their first full year of sales (Citroen C1 and C6, Peugeot 107, 1007 and 407).

In the medium term, PSA is continuing to target annual sales of four million vehicles and an operating margin of 6% (group operating margin for 2005 was 3.4%, down from 4.4% in 2004).

Faurecia sales and revenue rose 2.4% to EUR10,978m, of which EUR8,510m was for sales to companies outside the PSA group.

The component supplier's operating margin fell to 2.4% of sales, from 2.6% in 2004, due to an increase in raw material costs and a decline in sales to French automakers.