PARIS -- PSA Group increased sales and profit in the first half, setting a profitability record at its automotive division, after the automaker boosted sales of new, more expensive cars such as the Peugeot 3008 and 5008 SUVs.
Net income rose 3.6 percent to 1.26 billion euros ($1.46 billion) on a 5 percent increase in revenue to 29.2 billion euros, the automaker said on Wednesday in a statement, as stronger pricing more than made up for weaker sales volumes in Europe and China.
Recurring operating income rose to 2.04 billion euros ($2.37 billion) from 1.83 billion euros a year earlier.
Automotive operating margin jumped to 7.3 percent from 6.8 percent in the first half to a historic high, PSA said.
The automotive unit "delivered a performance level that more than compensated for headwinds" including lagging Chinese sales, currency effects resulting from Brexit and rising raw material costs, Chief Financial Officer Jean-Baptiste de Chatillon said during a call with journalists.
"We are now in position to deliver recurrent profitability," Chatillon said. "There are always headwinds, but we are able to withstand them while maintaining a high level of profitability."
Weaker first-half vehicle sales in Europe and a sharper slowdown in China had sparked concerns about the pace of PSA's recovery.
PSA said its market-share decline -- particularly in Europe -- wiped 92 million euros from profit. Higher raw-material costs trimmed a further 129 million and currency effects 255 million. But its product mix added 456 million euros and pricing another 41 million -- both helped by a flurry of new model launches. Peugeot, Citroen and DS all increased their average prices, according to an investor presentation.
Market growth also contributed 178 million euros.
PSA is acquiring General Motors' Opel and Vauxhall brands to gain scale in its home continent. The companies are on track to close the deal before the end of the year, with authorization still pending for Opel bank, Chatillon said.
Global unit sales rose 2 percent in the first-half, the company reported earlier this month. However, without taking into account Iranian sales, where the automaker created joint ventures to re-enter the country, deliveries of PSA’s vehicles declined by more than 10 percent.
PSA sees automotive recurring operating margin of more than 4.5 percent on average over the 2016-2018 period and above 6 percent by 2021. The company is targeting revenue growth of 10 percent between 2015 and 2018, with an additional 15 percent increase by 2021.
PSA upgraded forecasts for some of its key automotive markets. In Europe, it predicts the market will expand by around 3 percent this year, up from an earlier estimate of about 1 percent. In Latin America, it sees 5 percent growth, versus 2 percent previously. In Russia, PSA forecasts a 5 percent expansion, up from no growth. It stuck with an estimate of 5 percent growth in China.
PSA rebounded from near-bankruptcy and a government-backed bailout in 2014 to an industry-leading automotive profit margin last year on the strength of cost-cutting, a pared-down lineup and determined efforts to lift prices.
Bloomberg contributed to this report