UPDATE 5-Peugeot unveils 3.3 bln euro margin boost plan

* To boost productivity, cut costs, target growth markets

* "Priority to get our house in order"

* H2 operating profit seen at break-even

* Full-year free cash flow seen positive

* Previously saw full-year operating loss 1-2 bln euros

* Shares pare early gains, up 0.4 pct (Adds details on new models, market share, updates shares)

By Helen Massy-Beresford

VELIZY, France, Nov 12 (Reuters) - Europe's second-biggest carmaker PSA Peugeot Citroen (PEUP.PA) on Thursday raised its full-year outlook and unveiled a plan to lift earnings via productivity improvemenmts, costs cuts and more sales in emerging markets.

The company said it wanted the 3.3 billion-euro ($4.95 billion) initiative to substantially narrow the profitability gap with better-performing rivals like Volkswagen (VOWG.DE), Honda (7267.T), Hyundai (005380.KS), Daimler (DAIGn.DE) and Fiat (FIA.MI) by 2012.