PARIS -- PSA/Peugeot-Citroen posted positive first-half net income for the first time in four years as the automaker tightened control on spending and sold more vehicles at higher prices in its home region and in Asia.
PSA recorded net income of 571 million euros ($631 million) for January-June, after a 114 million euro loss a year earlier, the company said in a statement today.
"We have achieved all of our Back in the Race goals faster than expected," Chief Financial Officer Jean-Baptiste de Chatillon told reporters on a conference call. "But we remain cautious because this first half benefited from favorable conditions and positive seasonal effects," Chatillon said. "We're aware that we face some headwinds in the second half."
First-half revenue rose 6.9 percent to 28.9 billion euros. Recurring operating income surged to 1.42 billion euros ($1.57 billion) from a restated 387 million euros a year earlier.
Earnings at the automotive division were 975 million euros, with about one-third of the improvement coming from a "favorable business environment," and the rest from cost cuts, more sales of higher-priced vehicles and reduced discounting, PSA said. That lifted the divisional operating margin to 5 percent of sales, a level not seen for more than a decade and in line with a target the company has set for the 2019-2023 planning period.
A weaker euro, falling raw material costs and other seasonal tailwinds accounted for about one-third of the first-half operating income of 1.08 billion euros, Chatillon said.
PSA stuck to medium-term recovery goals it has already surpassed in the first half, including a 2 percent auto division margin and 2 billion euros of cumulative cash flow by 2018.
Operating free cash flow rose by two-thirds to 2.79 billion euros in the first half, PSA said.
CEO Carlos Tavares warned that of tougher market conditions in the rest of the year. "Our first-half results are very positive but we need to review them on a full-year basis," he said in the statement.
PSA's first-half deliveries rose 0.4 percent to 1.55 million cars and light commercial vehicles, with demand in Asia, Europe and the Middle East making up for plunging sales in Latin America and Russia.
Growth was helped by the Peugeot 308 hatchback and Citroen C4 Cactus crossover.
PSA said it expects automotive demand to expand by 6 percent in Europe this year, by 3 percent in China and to fall by 15 percent in Latin America and plunge by 35 percent in Russia.
Tavares said PSA needs to be "focused on the full execution of the Back in the Race plan to secure the automaker's recovery amid an "unstable international environment."
Tavares is seeking to sustain earnings after PSA posted its first annual operating profit in three years in 2014. Following a 3 billion euro bailout that saw the French government and China's Dongfeng buy matching 14 percent stakes in the company last year, PSA hired the former Renault second-in-command and pledged to cut labor costs, inventory and model line-ups to restore profitability.