PARIS -- PSA Group unveiled record first-half profits today as productivity gains and a European market rebound made up for mounting challenges in China.
Net income more than doubled to 1.21 billion euros ($1.33 billion) from 571 million a year earlier, the maker of Peugeot, Citroen and DS cars said in a statement, despite a decline in revenue and deliveries for January-June.
Recurring operating income jumped 32 percent to 1.83 billion euros ($2.01 billion).
PSA's closely watched auto division increased profit by a third to 1.3 billion euros, lifting its operating margin to an all-time high of 6.8 percent from 5 percent. Group revenue fell 0.9 percent to 27.78 billion euros on adverse currency effects.
PSA's global deliveries dipped by 0.2 percent to 1.54 million vehicles in the six months to June, with demand in Europe compensating for plunging sales in China and South Asia, Russia, the Middle East and Africa. In Europe, sales growth of 7.4 percent trailed the 9.1 percent increase in the market. Vehicle sales fell almost 20 percent in China.
Pricing nonetheless improved for all three brands, PSA said, and sales are expected to gain momentum from a product offensive getting underway, with eight model launches this year.
CEO Carlos Tavares aims to prove that PSA can grow again after years of cost cuts, two years after it was bailed out by Chinese automaker Dongfeng Motor and the French government. "Our continued performance reflects the success of the company's structural transformation," Tavares said in the statement.
Chief Financial Officer Jean-Baptiste de Chatillon said negative headwinds such as the UK's decision to quit the EU will be an "opportunity for us to demonstrate our agility." He said PSA's operational margin "remarkably resisted" a drop in the value of the pound against the euro in the first half.
He pledged 200 million euros in extra savings this year as PSA cuts wage costs towards a targeted 11 percent of revenue, from 12 percent last year. "These action plans are not over," he said. "We're continuing to right-size our fixed costs."
PSA relies on Europe for most of its sales and is the carmaker most exposed to the fallout if economic uncertainty sends British car sales plunging, according to Evercore ISI estimates.
The automaker became profitable again last year after implementing a strategy that included freezing workers' pay and expanding outside Europe, including in China, where it manufactures cars in a venture with Dongfeng.
PSA is seeking to cut its China operating costs by 10 percent annually over three years, de Chatillon said.
PSA expects the Chinese market to gain 8 percent this year. It forecasts the automotive market to grow by about 4 percent in Europe and to shrink by 12 percent in Latin America and 15 percent in Russia.
The company is aiming for average automotive operating profit of 4 percent of sales between 2016 and 2018, followed by a 2021 target of 6 percent. Its automotive-division margin in the first half was 6.8 percent.
PSA restated last year’s first-half results to account for Faurecia, the supplier in which the automaker is the major shareholder, having sold its exteriors business to Plastic Omnium.
PSA, which has flagged openness to mergers and acquisitions, frustrated some analysts by issuing no 2016 guidance, nor changes to mid-term profitability goals it has already beaten. The company "may stay unclear at this point on cash uses to keep its options open on M&A as long as possible," said Thomas Besson of Kepler Cheuvreux.
Reuters and Bloomberg contributed to this report