Payout will be first since 2010 as auto maker raises its profit and revenue targets

By Nick Kostov 

PARIS -- Peugeot, the French car maker that is in advanced talks to buy the European operations of General Motors Co., will pay its first dividend since 2010, another sign of the strong resurgence and renewed confidence at a company that was on the brink of financial collapse just four years ago.

In its full-year results on Thursday, Peugeot said it would make a payout of EUR0.48 ($0.51) a share, equivalent to a total dividend payment of EUR430 million. Net profit rose 79% to EUR2.15 billion from the year before.

The French auto maker, officially known as Groupe PSA SA, raised its medium-term profitability goal and said it is targeting revenue growth of more than 10% by 2018 compared with 2015.

The results add weight to the claims by Peugeot Chief Executive Carlos Tavares that he can steer a successful turnaround at GM's European operations, partly because the French and German companies are a good fit.

"There is significant complementarity between the German Opel brand and our three French brands; there is very limited cross-shopping," Mr. Tavares said. Peugeot shares fell around 2% in morning trading in Paris.

GM-owned Opel has posted an average of about $1 billion in losses each year over the past decade and a half, struggling as a regional player with a limited product line in the face of bigger, global auto makers such as Volkswagen AG and Toyota Motor Co.

Speaking to reporters, Mr. Tavares said there was no guarantee an agreement could be found with GM, but that Peugeot's net cash position of EUR6.8 billion allowed it to consider this type of deal. This compares with a net cash position of EUR4.56 billion at the end of December 2015.

Bringing together the French company's Peugeot, Citroën and DS brands with the Opel brand and its U.K. counterpart Vauxhall would bring "quite speedy" cost reductions, Mr. Tavares said. He confirmed that he intends to keep Opel as a German company.

Executives at the French car maker have scrambled to reassure politicians and union leaders about the possible acquisition. While a possible deal initially stoked concerns about job losses, French Finance Minister Michel Sapin and German Economy Minister Brigitte Zypries appear to be warming to the idea of Franco-German auto champion, saying Thursday that a tie-up could boost exports and help to improve competitiveness at both companies.

Together, Opel and Peugeot would leapfrog domestic rival Renault SA to become the second-biggest car maker in Europe after world leader Volkswagen.

Peugeot said that stronger pricing, sales of higher-value models and cost cuts helped lift the automotive operating margin to a record 6% last year from 5% in 2015, ensuring operating income rose to 32% to EUR2.61 billion despite a 1.2% fall in revenue to EUR54.03 billion. Lower restructuring costs and taxes also benefited the company's bottom line.

Mr. Tavares said the company's full-year performance showed the success of the company's structural transformation and had been achieved in "an adverse environment."

Having taken over in 2014, Mr. Tavares swiftly slashed costs by reducing the number of cars it makes and cutting the workforce, while preaching the dangers of expanding too quickly or chasing sales with discounts. He has recently changed his tune, mounting the audacious bid to buy Opel and in addition making an approach to Malaysian auto maker Proton Holdings Bhd.

The company added that it expects auto markets to be stable in Europe, Latin America and Russia this year, with China growing 5%.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

February 24, 2017 02:48 ET (07:48 GMT)