PARIS - PSA Peugeot Citroen cruised past sputtering regional rivals with a leap in 2002 operating profit on Wednesday, but cautioned that a faltering European market could cap margins this year.
Europe's second-biggest carmaker met an operating margin target of 5 percent for its core car division and said it would maintain or slightly increase this in 2003 despite betting the European market would dip between 0 percent to 2 percent.
That was a touch more upbeat than domestic rival Renault, whose shares were pounded after it said on Tuesday its profit margin would be flat this year despite hopes a welter of snazzy new models would help it buck tough conditions.
Analysts cheered PSA's solid performance in 2002, but the stock dipped 2 percent in line with the European sector, as signs the already wobbly car market still has some way to fall rattled investors anew.
"The fact they aim to nudge up their margin in what looks set to be a tough year shows they are one step ahead of the other mass makers," said autos analyst Robert Ashton at Commerzbank, who rated the stock "accumulate."
BLEAK EUROPEAN MARKET
PSA said net profit was flat at a forecast-lagging 1.69 billion euros in 2002, partly due to an early retirement charge and a difficult comparison after a one-off gain boosted last year's figure.
Operating profit rose to 2.91 billion from 2.65 billion in 2001 -- at the top end of market forecasts -- on sales of 54.44 billion euros compared with 51.66 billion.
PSA, hailed by analysts as Europe's most profitable mass carmaker, said it aimed to boost operating profit in 2003 to 3.0 billion euros to 3.1 billion euros thanks to cost-cutting, expansion outside Europe, and the ongoing success of hit models.
Chairman Jean-Martin Folz said the European car market was likely to dip between 0 percent and 2 percent in 2003, "excluding any major economic turmoil from international events."
"In an absolute nightmare scenario, it could fall as much as 10 to 15 percent, although this is not what I imagine," Folz told a news conference. "PSA is well placed to weather such a crisis since we could easily cut production and remain profitable."
Renault forecast a 2 percent dip in western European sales, with a worst case scenario of 6 percent or 7 percent.
The industry will get a picture of how January went when figures for Western European car registrations for the first month of the year are published on Thursday.
UPBEAT ON SALES
PSA posted another year of record unit sales in 2002 and vowed to do the same again this year despite tough competition from Renault and Volkswagen, which both launch new models that could prove a hit with motorists.
Volkswagen is due to report annual results next week.
PSA confirmed it is aiming to sell 3.35 million cars worldwide this year, driven by its key Peugeot 307, Citroen C3 models, and said it aimed to swell market share to 10 percent in every European country except Germany by 2004.
"Not only will we achieve this, but we are already ahead on the plan," he said, shrugging off analyst worries sales targets were over-ambitious in a year when competition will be tough.
Folz also confirmed PSA aimed to sell four million vehicles in 2006, raising operating margin in the car unit to 6 percent.
Much of the boost in profitability would continue to come from cost savings, which PSA has pledged will yield one billion euros by 2006, thanks to better manufacturing efficiency and by sharing parts across model lines.
"PSA has gained from a range of good models but they are not young any more," said West LB analyst Arndt Ellinghorst. "The results must come from increased efficiency and that is what they have shown they are working on."
PSA also said it would announce next week a new plan to build clean diesel engines with Ford Motor Co., which it hopes will make it the largest producer of the more efficient motors in the world.
Twelve analysts polled by Reuters expected PSA to post 2002 net profit of 1.801 billion euros, compared with 1.691 billion the previous year and operating profit of 2.85 billion versus 2.652, and to comfortably meet its margin target.