Peugeot-maker PSA‘s shares hit a 10-year high after it turned its recently-acquired Opel-Vauxhall business sharply back into the black while achieving record first-half profitability at its French car brands.
PSA is benefiting from runaway sales of its Peugeot 3008 and 5008 SUVs enhanced by years of cost savings under CEO Carlos Tavares, who pulled the group from near-bankruptcy in 2014.
Mr Tavares is now applying the same medicine at Opel, which was acquired from General Motors barely a year ago and last turned a full-year profit in 1999. “The turnaround of Opel-Vauxhall is now clearly under way,” CFO Jean-Baptiste de Chatillon said. Its first-half net income to June 30 rose 18pc to €1.481bn, as revenue jumped 40pc to €38.6bn.
PSA shares rose as much as 12.6pc to their highest since 2008 and were up 10pc at €22.48 at 8.54am.
“The improvement PSA has achieved over the last six months is remarkable given that (Opel) lost €179m in the second half of 2017,” said Arndt Ellinghorst, a London-based analyst with Evercore ISI.
Cost-cutting at Opel, which had lost a billion dollars a year under GM ownership, helped the division record a half-billion-euro profit for a 5pc operating margin.
The profitability of French brands Peugeot, Citroen and DS topped 8.5pc, overshooting a 6pc goal for 2021. Overall recurring group operating profit rose by almost half to €3bn, PSA said, for a 7.8pc margin.
The results soundly beat analyst expectations of €1.35bn in net income and €2.33bn in operating profit on revenue of €38.49bn, based on the median estimates in an Inquiry Financial poll for Reuters.
Opel‘s better-than-expected performance could signal readiness for further consolidation. Mr Chatillon stressed the company‘s €8.2bn net cash position, up by one-third since December.
But it could also complicate talks with German unions, as PSA seeks to offload engineering departments at its Ruesselsheim headquarters near Frankfurt.
PSA, which is already cutting 3,700 Opel manufacturing jobs, enraged unions last month when it confirmed it was seeking a buyer for R&D activities that employ another 4,000 staff. (Reuters)