Net earnings at Peugeot Citroen, Europe's second-largest carmaker, fell in the first half from €858m a year ago to €681m because of weak sales in Europe and higher raw material costs.
The company is increasingly reliant for growth on expanding markets outside Europe, which now account for almost 30% of sales. It warned that higher raw material prices would hit full-year earnings by as much as €300m, with a further impact next year.
Peugeot, which launches its new 207 model in early 2006 and has put out five new models this year, said operating profits at its core division fell from €770m to €650m but the full-year margin would remain within its target of 4-4.5%.
Jean-Martin Folz, chief executive, said the group had regained control of its margins by refusing to discount prices in the UK, Germany and Italy - at the cost of market share. Peugeot expects the new models to boost sales growth.
