Peugeot sets new profitability record on pricing gains

PSA Group increased sales and profit in the first half, the maker of Peugeots and Citroens said, beating analyst expectations with a new profitability record at its core manufacturing division.

Net income rose 3.6 percent to 1.26 billion euros ($1.46 billion) on a 5 percent increase in revenue to 29.17 billion, the French carmaker said on Wednesday, as stronger pricing more than made up for weaker sales volumes in Europe and China.

The core automotive operating margin jumped from 6.8 percent to 7.3 percent, setting a “new historic high” for the carmaker, Chief Financial Officer Jean-Baptiste de Chatillon said on a conference call with reporters.

The Paris-based carmaker rebounded from near-bankruptcy and a government-backed bailout in 2014 to a 6 percent automotive operating margin last year on the strength of cost-cutting, a pared-down lineup and determined efforts to lift prices.

Weaker first-half vehicle sales in Europe and a sharper slowdown in China had sparked concerns about the pace of PSA’s recovery just as it prepares to acquire Opel from General Motors , in a deal closing later this year.

But the first-half numbers squarely beat analyst expectations of 28.92 billion euros in sales, 1.3 billion in automotive profit and a 1.06 billion-euro net profit, based on the median of nine estimates polled for Reuters.

PSA also raised its full-year European auto-market growth forecast to 3 percent from one percent and its Latin American and Russian growth forecasts to 5 percent from 2 percent and flat, respectively.