PSA Group has today announced its first dividend in six years and raised its medium-term profitability goal after its full-year profit almost doubled.
The French carmaker in talks to buy Opel from General Motors.
The 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% last year from 5% in 2015.
The group raised its automotive margin goal to an average 4.5% for the 2016-18 period while it declined to comment in detail on its continuing Opel takeover talks with GM.
PSA's €6.8 billion in net cash equips the company to make "profitable investments in the interest of our shareholders", the company's chief financial officer Jean-Baptiste de Chatillon said.
"At this stage there can be no certainty as to the outcome of these talks," he added.
The French group and Detroit-based GM confirmed on February 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 €1.5-2 billion euros, sources told Reuters this week.
The company said its net income rose 92% to €1.73 billion last year. Recurring operating income rose 18% to €3.235 billion on €54 billion in revenue, down 1.1%.
That beat expectations of €3.14 billion in recurring operating income and €53.7 billion in revenue.
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 €365m to 2016 earnings. Cost cuts in purchasing, production and overheads delivered a further €863m.
"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%.
