Moody’s Sees Black Numbers in 2014
Peugeot-Citroen’s target of breaking-even by 2014 looks tough because of deteriorating markets even if it carries out its current plan impeccably, said Moody’s Investors Service as it cut the company’s rating again.
Losses will continue into 2013 and further tough action might be required, Moody’s said.
Peugeot-Citroen reported an operating loss of €662 million in the first half of 2012, compared with a loss of €92 million in the same period last year. Analysts estimates for all of 2012 range up to a loss of €1 billion, also with red ink in 2013. Peugeot-Citroen announced last month it would close the Aulnay plant near Paris in 2014 eliminating 6,500 jobs, and axe another 1,500 jobs across the organisation. It has sold assets worth €1.5 billion and launched a €1 billion rights issue.
“Even if these measures are timely implemented, these circumstances (deteriorating market conditions) will stress the company’s metrics much beyond the existing rating category for the next couple of years,” Moody’s analyst Falk Frey said.
As European markets weaken further into 2013, Peugeot-Citroen might need to take further action to stabilise its operations and achieve the targeted turnaround, Frey said.
Capacity cuts might not be enough
“Should car demand in Europe remain at current low levels, the initiated reduction in capacity at Aulnay and Rennes of approximately 300,000 units might not be sufficient for the company to achieve sustainably solid profitability well above break-even level,” Frey said.
“Moody’s expects the automotive division’s reported recurring operating income to remain negative in 2013 before turning positive in 2014, which assumes timely implementation of Peugeot-Citroen’s announced restructuring plan,” he said.
Meanwhile, Peugeot-Citroen wouldn’t confirm press reports that it had cut sales projections for the new Peugeot 208 for 2012 to 140,000 from the 175,00 originally targeted.
Neil Winton – October 14, 2012
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