(Adds executive comments, details, background)
By Laurence Frost and Gilles Guillaume
PARIS Feb 23 PSA Group, the French
carmaker in talks to buy Opel from General Motors,
announced its first dividend in six years and raised its
medium-term profitability goal on Thursday after full-year
profit almost doubled.
The Paris-based maker of Peugeot and Citroen cars said
stronger pricing, sales of higher-specification models and cost
cuts lifted the automotive operating margin to a record 6
percent last year from 5 percent in 2015.
The group raised its automotive margin goal to an average
4.5 percent for the 2016-18 period while declining to comment in
detail on its continuing Opel takeover talks with GM.
PSA's 6.8 billion euro ($7.2 billion) in net cash equips the
company to make "profitable investments in the interest of our
shareholders", Chief Financial Officer Jean-Baptiste de
Chatillon told reporters on a call.
But he added: "At this stage there can be no certainty as to
the outcome of these talks."
The French group and Detroit-based GM confirmed on Feb. 14
they were in talks over a PSA-Opel tie-up to create Europe's
second-largest carmaker by sales after Volkswagen.
PSA expects the deal to lead to combined sales of 5 million
vehicles in 2020-22 and savings between 1.5 billion and 2
billion euros, sources told Reuters on Wednesday.
Net income rose 92 percent to 1.73 billion euros last year,
PSA said. Recurring operating income rose 18 percent to 3.235
billion euros on 54 billion euros in revenue, down 1.1 percent.
That beat expectations of 3.14 billion euros in recurring
operating income and 53.7 billion in revenue, based on the
median estimates in an Inquiry Financial poll of 13 analysts.
Under Chief Executive Carlos Tavares, PSA has rebounded from
a 2014 brush with bankruptcy and state-backed bailout to record
levels of profitability, thanks in part to a programme of
cutbacks instituted by his predecessor Philippe Varin.
Emergency development budget cuts left a hole in the
pipeline of new models that is only now beginning to be filled.
With a new product offensive in its early stages, PSA said
pricing improvements contributed 365 million euros to 2016
earnings. Cost cuts in purchasing, production and overheads
delivered a further 863 million euros.
"The effect will be amplified this year," Chatillon said, as
the pace of the launch of new models increases.
PSA proposed a dividend of 0.48 euros per share on the 2016
earnings, its first such payout since 2011.
The company said it expected "stable" demand in the
European, Latin American and Russian markets this year, with
China growing another 5 percent.
($1 = 0.9463 euros)
(Reporting by Laurence Frost and Gilles Guillaume; Editing by