PSA Peugeot-Citroen turned a huge 2009 loss into a profit in the first half of 2010, but investors didn’t like the company’s predictions about this year’s second half, or weak cash flow figures, despite predicting a substantial profit for the whole year.
In 2010’s first half, Peugeot Citroen reported net income of €680 million, up from a €962 million loss in the same period last. The company predicted full year operating income of €1.5 billion. In all of 2009, Peugeot-Citroen’s net loss increased to €1.2 billion from €363 million the previous year.
After the results were announced Peugeot-Citroen’s stock price jumped over one per cent on the Paris stock market. After the company announced its outlook for the year, the price went into reverse, shedding close to four per cent.
“The economic context had a positive impact in the first half. Clearly the economic context is going to be less favourable, and will have a negative impact in the second half,” CEO Philippe Varin told a news conference.
Commerzbank analyst Sascha Gommel said investors didn’t like the company’s outlook, but he thought positive product momentum would keep the company ahead of the game in the second half. Gommel gave four reasons to have confidence in the company.
- Mix should improve as scrapping schemes are phasing out and new model launches are kicking in like the Peugeot 508 replacing the 407 and 607, or the new Citroen C4 2.
- The relatively low free cash flow of €341 million was mainly driven by a seasonal build-up in working capital which should normalise.
- The company is reducing dependence on Europe as sales to China, Russia and Latin America increase gradually.
- Peugeot Citroen reduced its cost base and is already profitable at a capacity use of 89 per cent, which was not the case prior to the crisis.
Neil Winton – August 15, 2010
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