PSA Peugeot Citroen has announced that net profit fell in 2004 due to fierce competition in Europe. But the carmaker said it would continue renewing models to attract buyers.

Peugeot posted a net profit of €1.36bn (£94m).

The group said operating profit fell 1.44% to €2.18bn (£1.59bn) compared with €2.21bn (£1.53bn) in 2003, on sales of €56.8bn (£39.4bn), up 4.7% from 54.24bn.

The operating margin slipped to 3.8% from 4.0% in 2003.

Looking ahead, the group said it expected moderate sales growth in 2005.

And while the automobile market was expected to be stable, with a slight upturn in western Europe, PSA Peugeot Citroen said it was forecasting "a continuation of a sustained competitive climate".

Peugeot, which sold better as a brand than Citroen, plans to launch three new models in 2005, while Citroen has two new cars ready to come onto the market.

Jean-Martin Folz, Peugeot's chief executive, also revealed that Ryton had been one of several Peugeot plants in the running to build the new model – dubbed the 207 – in 2002.

Peugeot applied for EU state aid for Ryton to underwrite a £191m investment. But by the time the EU agreed a €21m (£14.4m) grant, the 207 had been allocated to other plants in France and Slovakia.