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PSA Peugeot-Citroen: 2006 Net Profit Down

French automaker PSA Peugeot-Citroen said Wednesday net profit tumbled in 2006 on weaker worldwide sales, a poor product lineup, the cost of complying with new European pollution standards and higher raw material prices.

Net income fell to 176 million euros ($228 million) from 1.03 billion euros ($1.33 billion) in 2005, the company said in a statement. Revenue rose 0.6% to 56.59 billion ($73.31 billion).

Analysts had anticipated a sharp decline in Peugeot-Citroen's profitability last year as the company battled fierce competition from Asian and German manufacturers with an aging product line.

Nonetheless, the figures came in well below an average consensus of 533 million euros ($691 million) among analysts polled by Dow Jones Newswires, but the operating margin - a closely watched barometer of carmakers' health - was slightly above the consensus figure of 1.8%.

The company's operating margin fell to 2.0% in 2006 from 3.4% a year earlier.

Operating profit fell to 1.12 billion euros ($1.45 billion) from 1.94 billion euros ($2.51 billion) in 2005, while net cash from operating activities of the company's manufacturing and sales operations increased to 3.44 billion euros ($4.46 billion) in 2006 from 3.39 billion euros ($4.39) a year earlier.

The company has issued three profit warnings over the course of the last five quarters.

Peugeot expects the European automobile market to remain stable this year, and sees no let up in the "rampant competition" that it suffered last year.

Still, "while group sales are likely to be affected by a certain slowdown in demand for models that are due to be replaced, they will be boosted by the steadily increasing product dynamic over the year, leading to a gradual improvement in the product mix," the company said in its earnings press release.

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