Nissan, Daimler Contradict Peugeot Experience And Market Pounces
But Some Investors Still Like Model Programme, Premium Push
Peugeot-Citroen blamed Japan-natural disaster induced supply disruption for its decision to slash its profit estimate for the second half, which was unfortunate because Nissan and Daimler said at the same time that this wasn’t much of a problem for them.
“Rule number one when preparing excuses: pick a good one,” said the Financial Times Lex column, adding that this unconvincing explanation was behind the stock market’s sharp reaction to Peugeot’s news.
Peugeot-Citroen’s share price dived eight per cent after its news.
Peugeot-Citroen’s first half recurring operating income slipped to €405 million from €525 million in the same period of 2010. The company warned that it would take a €300 million hit in the second half because of the Japan impact, as well as raw material price increases.
Peugeot-Citroen said it will look for more savings to make up for the €300 million hit, which will otherwise cut 2011 auto-division operating profit to €321 million from €621 million last year. That would add up to an €84 million loss in the second half. The division last made a loss two years ago.
Despite this bad news, some investors kept the faith.
“Peugeot-Citroen benefits significantly from an improved product mix which should accelerate in the second half with the ongoing introduction of the 508, DS4, and the DS5,” said Commerzbank auto analyst Sascha Gommel.
Bernstein Research analyst Max Warburton was sympathetic too.
“Mix is getting better, but it’s not getting to the bottom line. Peugeot-Citroen products cannot be faulted and many of the new launches are proving successful and have enhanced mix. It seems that the achieved revenue and profit benefits have proven quite limited, due, we assume to tough pricing in other segments,” Warburton said.
The FT’s Lex was less sanguine.
Stern judgment
“The market’s stern judgment says a lot about the challenges facing Peugeot chairman Philippe Varin, now two years into the job,” said Lex.
PSA Peugeot-Citroen is simply not shifting enough cars and vans. The push into premium made sense, but takes time.
“Until Mr Varin finds ways to regenerate the core, though, Peugeot (share price) will continue to languish. Two years ago, PSA was trading at just under half the average price/book valuation of the European auto sector; today it is two-fifths. Before long the excuses will start to dry up,” Lex said.
Neil Winton –August 1, 2011
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