Peugeot shares soar as its auto division roars back into profit

SHARES in French carmaker Peugeot-Citroën zoomed up over six per cent yesterday, after the company revealed strong improvement in operating income.

In addition, its auto division was back in profit for the first time in three years, as its four year turnaround strategy began to bear fruit.

Consolidated operating income before one time items and charges was €477m (£376m) in the first half of 2014, a strong recovery from its operating loss of €100m in 2013.

The auto division saw operating profit of €7m in the first half of 2014, a dramatic improvement on a €538m loss a year earlier.

There was also a strong boost to positive free cash flow, up to €1.5bn.

Chief executive Carlos Tavares said: “The commitment of every PSA Peugeot-Citroën employee to deploying our Back in the Race strategic plan has enabled the group to reap the initial benefits of this transformation, and we remain disciplined and focused on executing our plan until we have completely recovered.”

As part of the wide ranging turnaround strategy, including significant cost cutting, Peugeot will also reduce its number of models from 45 to 26 by 2022, and look to expand in markets outside Europe including China, where it signed a partnership with Chinese car maker Dongfeng earlier this year.

Second half challenges include slow recovery in French demand and instability in markets such as Russia.