PARIS, July 30 – French car maker Peugeot Citroen showed sharp acceleration on the road to recovery on Wednesday, boosted by a new tie up with Chinese group Dongfeng.
The group, which was in severe financial difficulties in the last two years, launched a strategic plan called “Back in the race”, in April, and on Wednesday announced a “very strong” turnaround.
The group reduced a net loss in the first half to 114 million euros ($153 million) from 471 million euros.
And it turned in a current operating profit, of 477 million euros, for the first time since 2010, reversing a loss of 100 million euros last time.
The price of shares in the group also accelerated on the results, showing a gain of 6.51 percent to 11.285 euros in mid morning trading. The CAC 40 overall French index was down 0.21 percent.
But sales slipped by 0.45 percent to 27.6 billion euros, mainly because of unfavourable exchange rates.
Sales by the auto division were steady at 18.6 billion euros.
The company’s cash position improved sharply. This free cash flow measure, a key figure in the auto industry, and particularly for the PSA Peugeot Citroen group which had been consuming cash at a rapid rate, was positive to the extent of 1.7 billion euros. A year ago it was 203 million euros.
“We can announce a very strong recovery of the group,” finance director Jean-Baptiste de Chatillon told a telephone press conference.
At the worst point of its recent difficulties, the PSA Peugeot Citroen group was in effect rescued by the French state by way of huge guarantees for its finance arm.
Under a major restructuring earlier this year, Dongfeng and the French state each became shareholders, ending the Peugeot family’s controlling interest.
The strategic plan, based heavily on ramping up sales in China as well as on other non-European markets, was presented by the new chief executive Carlos Taveres, formerly number two at the other big French auto group Renault.
Chatillon said that the recovery was particularly strong in the auto division which had turned in an operating profit of 7.0 million euros from a loss of 538 million euros in the first half of last year.
Sales were growing in China, and the group was reducing losses in Latin America and in Russia, he said.
Under the strategic plan, the group has launched a new brand, the DS, to target the top end of the market, and intends to reduce the overall number of models.
The group held to its forecasts for the year, except in Russia where the market is expected to shrink by 10.0 percent this year, twice the amount forecast previously.
The group sees the market growing in Europe by 3.0 percent, and in China by 10.0 percent, but predicts a downturn of 7.0 percent in Latin America.