The Wall Street Journal (Paris) - French auto maker PSA Peugeot-Citroen said Wednesday its first-half net profit rose 19% despite a €147 million ($213.3 million) impact from the Japanese disasters in March and higher-than-expected raw materials costs.
Europe's second-largest automotive group said it still expects higher operating earnings for the full year although these costs will continue to weigh in the second half.
Peugeot-Citroen said net profit increased 19% in the first half to €806 million, from €680 million a year earlier, due to the contribution of subsidiaries like car-parts maker Faurecia SA, which reported an 82% jump in net profit on Tuesday. Revenue rose 9.7% to €31.14 billion.
The auto maker said the effects of the Japanese events shaved €147 million off its operating profit in the first half and predicted a further €100 million cost in the second half. Car producers the world over were hit by the events in Japan as automotive parts supplies were crimped as factories shut down or slowed production.
Rising raw material costs also eroded operating profit by €366 million in the first six months, and Chief Financial Officer Frédéric Saint-Geours said the company is raising its estimate of the likely impact for the full year to €700 million from a previous estimate of €500 million.
The company said the gains from its profitability-enhancement plan it is implementing will only partially compensate the unexpected extra costs.
"Before, we had expected a significantly higher operating profit, but this margin has now been reduced," Mr. Saint-Geours told journalists in a conference call.
The company's operating margin retreated to 3.7%, from 4.0% a year before, while operating profit increased just 1.8% to €1.16 billion. The company said it expects cash flow to be close to zero for the full year.
Excluding the impact of the Japanese disasters, Peugeot-Citroen's first-half operating profit would have been 15% higher at €1.30 billion.
Operating profit at Peugeot-Citroen's automotive division—a key indicator of the company's financial health—contracted by €120 million to €525 million, or 1.8% of sales, but excluding the Japanese events it would have risen 5.1% to €552 million.
Peugeot-Citroen said it still expects the European automobile market to remain stable in 2011, while the Chinese market is likely to expand by 7%, Latin America by 6% and Russia by 30%.
Peugeot-Citroen said its inventories of finished vehicles represented 76 days of sales at the end of June, up from 72 a year before. Vehicle sales rose by 1.2% but the main revenue driver was an improvement in product mix as customer preference switched from small vehicles to larger, higher-value vehicles.
