FRANCE: PSA Peugeot Citroen misses H1 operating margin target
The consolidated operating margin at PSA Peugeot Citroen was below target in the first half of 2006 at EUR691m, or 2.4% of sales compared with the target of around 2.8%.
In contrast, PSA achieved a margin of EUR1,289m - 4.4% of sales - in the first half of 2005.
The company said the year on year plunge was because the impact of higher raw materials costs on the automobile division's operating margin was far greater than expected.
The automobile division operating margin nosedived to EUR227m from EUR763m in first-half 2005 with higher raw materials prices having a negative impact of EUR206m.
This was greater than expected, due to the recent increase in the prices of precious metals and non-ferrous metals, particularly aluminium. Changes in the product mix (such as the ramp-up of the new 207) also had a temporary negative effect. On the other hand, ongoing cost-cutting programs had a EUR288m positive impact.
Banque PSA Finance's operating margin rose 5.8% to EUR293m from EUR277m in first-half 2005, led by an increase in the loan book.
Gefco's operating margin was unchanged at EUR80m, representing 4.8% of revenue versus 5.3% in first-half 2005.
Faurecia's operating margin almost halved to EUR85m from EUR160m in first-half 2005, representing 1.4% of sales versus 2.9%. The decline was due to a fall-off in business in France and continued heavy pricing pressure in an environment of rising raw material and energy costs, as well as to the non-recurring start-up costs of the many new facilities opened outside western Europe.
Net profit more than halved to EUR303m, compared with EUR752m in first-half 2005.
Earnings per share were EUR1.32 versus EUR3.26 a year earlier.
Consolidated sales and revenue for H1 2006 rose just 0.3% to EUR29,093m.
Automobile division sales fell 1.7% to EUR22,987m, reflecting slightly higher unit sales (up 0.6%) and the temporary effect of an unfavourable change in product mix due to growing sales of the cheap entry-level Czech Republic-built Peugeot 107 and Citroën C1 launched in June 2005.
Gefco reported first-half revenue up 9.2% to EUR1,658m.
Faurecia sales increased 6.5% to EUR5,980m. On a constant exchange rate basis and excluding the price impact of precious metals used in catalytic converters, sales were down 0.1% for the period.
The Banque PSA Finance loan book grew 5.0% to EUR22,879m from EUR21,783m a year ago.
PSA described its western Europe sales as "resilient" at 1,235,200 vehicles, down just 0.7%, although the new Peugeot 207 contributed to sales only in the second quarter. Its market share was stable compared with second-half 2005 at 14%.
There was stronger growth outside western Europe with sales of 407,200 built-up vehicles, up 18.1%.
Other H1 expenses included EUR227m in costs related to the controversial closure of the Ryton plant in the United Kingdom, scheduled for the first half of 2007, and EUR107m in restructuring costs at Faurecia, mainly in the car seats division in France, Germany and the United Kingdom.
For the full year, in western Europe, the PSA group expects unit sales to return to growth in the second half after the slight decline in the first half, led by increasing demand for the Peugeot 207, and the Peugeot Boxer and Citroën Relay vans, introduced in the second quarter.
Outside western Europe, in a market environment that is seen as remaining generally favourable, it expects sustained growth of over 10% due to ongoing expansion of the model line-up.
"The group therefore expects sales and revenue to grow at a faster rate in the second half," PSA said in a statement.
"Ongoing line-up renewal will help to improve margins. In addition, the group will continue to reduce production costs at an annual pace of EUR600m, before taking into account the growing contribution of production from the new Trnava plant.
"However, higher raw materials prices will weigh even more heavily on operating margin in the second half. Based on current prices, the group expects the impact to be around EUR250m versus EUR206m in the first half. At the same time, the market environment in Europe is likely to remain very strained, with ever increasing competition and stable demand."
It expects second-half operating margin on par with that in the first half.