PARIS -- PSA Group reported record sales, profit and operating margin for 2017 while limiting losses at its newly acquired Opel division.
Net income rose 11.5 percent to 1.93 billion euros ($2.35 billion) last year on 65 billion euros in revenue, up 21 percent, PSA said in a statement on Thursday.
Operating income jumped 23 percent to 3.99 billion euros despite a 179 million-euro ($218 million) Opel loss since the Aug. 1 consolidation of the former General Motors business.
Opel's loss was less than half the amount expected by JPMorgan Chase & Co. analyst Jose Asumendi. It may be a sign that PSA CEO Carlos Tavares is making progress toward a turnaround of Opel and its UK sister brand Vauxhall.
"We are very bullish," Tavares told analysts and reporters on Thursday.
Tavares has been busy integrating Opel and Vauxhall into the overall operation that includes PSA's Peugeot, Citroen and DS marques, where earnings have been on an upswing.
Tavares has pledged to apply the methods he used to revive Peugeot and Citroen following a 2014 bailout that brought in the French government and China's Dongfeng Motor as new investors -- measures that included freeing pay and reducing the headcount. PSA is negotiating with unions to cut jobs and reduce work hours at Opel to halt almost two decades of losses.
'Strong changes'
"We have strong changes which are happening in Opel Vauxhall," Chief Financial Officer Jean-Baptiste de Chatillon told journalists. After reaching labor agreements across most of the former GM operations in Europe, "we are very confident" of achieving profitability and cash-flow goals for the unit by 2020, he said.
Evercore ISI market analysts forecast Opel will breakeven this year and and achieve a 1.8 percent profit margin in 2020, just below PSA's 2 percent target for the automaker.
"The stage is now set for PSA to demonstrate its ability in turning around a severely struggling company, a job made even more difficult given they will be attempting to do this during a period when sales are likely to underwhelm," Evercore said in a note to investors.
Despite new launches such as the Grandland X and Crossland X crossovers, Opel is losing market share, Evercore said. "In our view, the Opel brand has seemingly fallen out of favor with EU consumers," it said.
Peugeot, Citroen and DS margin
The profit margin at Peugeot, Citroen and DS widened to 7.3 percent of revenue from 6 percent in 2016, "effectively the best result ever achieved by PSA," de Chatillon said. Group automotive operating margin fell to 5.9 percent from 6 percent.
PSA is battling to reverse last year's sales drop in China. As part of its expansion strategy in Asia, it extended a vehicle-assembly tie-up in Malaysia earlier this week to include a majority stake in the partner.
De Chatillon denied a news report from last year that PSA is seeking millions of euros from GM because it was misled about Opel's auto-emissions strategy. "There is no problem with emissions," as terms were included in the sales contract, he said, adding that "accounting technical discussions" are still going on with GM.
Reiterating mid-term goals that include a 6 percent margin excluding Opel for 2021, compared with 7.3 percent last year, de Chatillon said the targets will be reviewed early next year and could be raised. "We are certainly doing quite well right now," Chatillon said. "Let's see in 2019."
PSA sees little growth in the European car market this year. The automaker has become even more reliant on the region since acquiring Opel and Vauxhall, even as it continues to expand abroad.
Reuters and Bloomberg contributed to this report
