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PSA Peugeot Citroen SA says vehicle sales were little changed in 2005

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PARIS (AP) _ PSA Peugeot Citroen SA, Europe's second-largest carmaker after Volkswagen AG, said Wednesday its vehicle sales were virtually flat in 2005 and said its operating profit margin was well short of its forecast.

The French automaker's global vehicle sales edged up 0.3 per cent to 3.39 million vehicles last year, and it estimated its operating margin, or operating profit as a share of revenue, at 3.4 per cent.

Peugeot had forecast a margin of "around four per cent'' just three months ago, when it cut its previous guidance of "between four per cent and 4.5 per cent,'' blaming tough competition for sales and rising raw materials prices.

The company had reported an operating margin of 4.1 per cent for the first half of 2005. Its full-year projection of 3.4 per cent implies a sharp drop in profitability in the second half of the year, with a margin of around 2.7 per cent.

The group, which markets vehicles under the Peugeot and Citroen brands, blamed the disappointing performance on a worse-than-expected fourth quarter, when it said the European market contracted by 2.9 per cent.

"The slowdown helped to worsen the competitive environment and resulted in lower group sales for the period,'' Peugeot said in a statement.

Like other carmakers, Peugeot was battered by ferocious competition in Europe as manufacturers, struggling with massive overproduction in recent months, sought to woo customers with deep discounts, free equipment and cheap financing.

The publication of a full-year operating margin estimate was unexpected. Peugeot had been scheduled to release unit sales Wednesday, but 2005 financial results are due to be published on Feb. 8.

Peugeot shares fell 0.7 per cent to 50.60 euros (US$61.04) in midday trading in Paris after opening with a decline of 3.2 per cent.

Peugeot said its unit sales fell 2.7 per cent in western Europe last year in a flat market, eroding its market share to 14.3 per cent from 14.6 per cent in 2004. Outside Europe, sales increased 8.4 per cent and represented more than 30 per cent of its total vehicle sales, up from around a quarter two years earlier _ a trend the company expects to continue.

Peugeot predicted that a series of recent and coming new model launches would help it achieve a ``return to unit sales growth in Europe'' this year despite expected flat demand.

Sales outside Europe were forecast to increase ``at the same sustained pace'' as in 2005, it said.

Peugeot's local rival Renault SA reported last week that its worldwide sales rose by 1.7 per cent last year, helped by its Dacia and Renault Samsung Motors subsidiaries in Romania and South Korea. Core Renault brand sales fell 2.6 per cent.

© 2006 The Canadian Press

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PSA Peugeot Citroen SA says vehicle sales were little changed in 2005
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