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PSA Shares Jump On 'Record' Profit, Opel Turnaround

Swiss -- Peugeot 3008 wins European Car of the Year. The SUV was unveiled as the winner on the very same day it was announced PSA Peugeot Citroen was to take over Opel-Vauxhall from General Motors.

Paris, July 24, 2018 (AFP)

Shares in French auto giant PSA jumped over 9.5 percent in Tuesday trading on the Paris stock exchange, boosted by a strong earnings report for the first half of 2018.

The results were driven partly by a major turnaround for Opel Vauxhall, which Peugeot owners PSA took over in 2017.

PSA's CEO Carlos Tavares said the company had secured a "record" 18 percent jump in profit to hit 1.48 billion euros ($1.73 billion).

Thanks in part to rising sales and cost reductions, PSA's Peugeot, Citroen and DS division secured an 8.5 percent recurring operating margin.

The Opel Vauxhall division, which PSA took over from General Motors, saw a 5 percent recurring operating margin, following several years of losses.

According to a statement, PSA's revenues jumped 40.1 percent to 38.6 billion euros in the first six months of the year.

The first half of 2018 "has been quite an interesting period", Tavares said in a videoconference with analysts.

He cited "significant headwinds in terms of forex volatility, in terms of raw material cost inflation, in terms of geopolitical chaos, in terms of regulatory uncertainty".

Despite the difficulties, the PSA group secured "a very rewarding 8.5 percent operating margin for the first half of 2018," Tavares said, while it was nearing zero in 2014.

He said the results were proof "that our company is now able to weather the storms".

PSA's strong results were driven by a new sales record of nearly 2.2 million vehicles sold around the world from January to June.

Tavares pointed to Peugeot's performance in Europe, where it has become "the number one of SUVs", thanks chiefly to the success of its 3008 model.

He also said Tuesday's earnings report took into consideration its pullout from Iran, to avoid the risk of US sanctions after Washington withdrew from a key nuclear deal with Tehran.

Last year PSA sold nearly 445,000 vehicles in Iran, making the country one of its biggest markets outside France.

Looking ahead, PSA said it anticipates a stable auto market in Europe, 4 percent growth in Latin America, 10 percent in Russia and 2 percent in China.