Second profit warning at Peugeot

Peugeot is not the only European carmaker suffering flagging sales

French carmaker PSA Peugeot Citroen has issued its second profit warning in just three months.

The firm said it now expected to report operating profits of 1.9bn euros (£1.3bn) for 2005, or 3.4% of sales, as trading deteriorated further.

Back in October, it warned that profits would be less than 4% of sales.

Peugeot Citroen sold 3.39 million vehicles in 2005, up 0.4%, at a time when most of Europe's carmaker are struggling against weak sales.

Despite low interest rates across Europe, unconfident consumers appear to be delaying large purchases.

Reducing car stocks

Peugeot Citroen's overall sales in 2005 were up just 0.4% to 3.39 million units, while sales in its key European market were down 2.7%.

It added that in the last quarter of 2005, European sales had declined more than expected, and that the market had become even more competitive.

"Because of that, the production reduction announced in the autumn has been stepped up but nevertheless without allowing us to bring down the stock of vehicles to target levels," it said.

Peugeot Citroen, the world's sixth-largest carmaker, is banking on several new model launches to put 2006 sales back on track.