French carmaker PSA Peugeot Citroen on Wednesday said its net profit in 2005 had fell by 37.5 percent due to high raw material costs, soft demand in western Europe and a rise in promotional spending.

The group's net profit in 2005 totalled 1.03 billion euros (1. 23 billion dollars), compared with 1.65 billion euros in 2004.

PSA said it had to absorb additional costs related to new environmental norms in Europe and that accounting changes had adversely affected the net profit figure.

Sales in 2005 increased by 0.3 percent to 56.27 billion euros ( 67.52 billion dollars), while operating profit fell 21.8 percent to 1.94 billion euros (2.33 billion dollars).

Peugeot chief executive Jean-Martin Folz said "the climate in 2006 will be difficult again".

"The European market should remain around the same level as in 2005 with continued pressure on prices along with a strongly negative impact from the cost of raw materials and adaptation of new European environmental standards," he said.

The group also said it would focus on cost-cutting and would launch new models, such as Peugeot 207 in April, in the hope of boosting sales in Europe.

Source: Xinhua