Peugeot beats expectations

PARIS, France (CNN) -- PSA Peugeot-Citroen, Europe's second-largest carmaker, said profit slipped lower, but beat analysts' expectations, as it reorganised its business in Argentina and Spain.

Net income dipped 4.1 percent in the first six months of this year to 985 million euros, compared with 1.03 billion euros in same period in 2001. Sales rose 4.4 percent though to 27.4 million euros.

The French carmaker, under the stewardship of Chairman Jean-Martin Folz, continued to consolidate its No.2 position in Europe behind Volkswagen (FVOW) as it rolled out a series of new models like the Peugeot 307 and the bubble-shaped Citroen C3.

Its market share rose one percentage point to 15.4 percent, despite western European car and light commercial vehicles sales declining by 4.7 percent in the first six months of this year. Many analysts expect new car sales to decline by about 5 percent this year, as consumers rein in spending on major items amid sluggish economic growth.

Peugeot Citroen's first-half worldwide sales rose 3.4 percent to 1.66 million cars and trucks and the company expects sales to increase by 4.8 percent to 3.25 million cars this year.

The company, which has said it expects an operating margin in its key autos division of 4.8 to 5.0 percent in 2002, said it would now target the top end of that range.

"Taking into consideration the results of the first half, we are now targeting an operating margin in the auto division of five percent and overall operating profit of 2.9 billion euros,'' the company said in a statement.

Its first-half operating profit rose 8.7 percent to 1.524 billion euros. Analysts polled by Reuters had expected the company to post net income of 892 million euros and operating profit of 1.47 billion.

"These results are very encouraging,'' Adam Collins, autos analyst at Schroder Salomon Smith Barney, told Reuters. He has an "outperform'' rating on the stock.

"We are encouraged by cash flow developments and they are saying they can achieve the higher end of their previous guidance despite market conditions that are worse than previously expected.''