PSA Peugeot Citroen has posted a net group loss of EUR343m for 2008.

Operating income was EUR550m, operating margin was 1% of sales and revenue was off 7.4% at EUR54.35bn. Global sales fell 4.9% to 3,260,388 units but the automaker maintained market share at 5% worldwide (it doesn’t contest North America) and 13.8% in western Europe.

One-time operating expenses totalled EUR917m but PSA said it achieved EUR1,414m in cost savings from its CAP 2010 plan.

In a statement, PSA said: “2008 was a highly contrasted year varying significantly from the first half of the year to the second.

“The first six months of the year showed strong improvements in both worldwide sales (up 4.6%) and operating margin (3.7% of sales and revenue), in line with the CAP 2010 programme.

“The second half saw the collapse of global automobile markets and a subsequent increase in inventory. In response, the group significantly reduced production in the fourth quarter and prioritised the reduction of stock in the dealer network. These two actions had a major negative effect on… profitability.”

The company claimed leadership both in low-emission vehicles -selling 1.1m emitting less than 140g of CO2/km last year – and in light commercial vehicles, taking 19.9% of the European market.

After a first half that saw sales increase slightly (+0.7%), sales and revenue reduced significantly in the second half of 2008, as the collapse of automotive markets spread around the world and sales shifted towards smaller vehicles.

After increasing 32.4% in the first half, operating income was negative in the second half, reflecting the collapse in volumes sold and the reduced fixed cost absorption due to group-wide production stoppages.

The one-time operating expense of EUR917m was caused by the “unprecedented collapse in the automotive market” which triggered new restructuring plans in both the automobile division and at the Faurecia parts unit costing EUR512m. The impact of the fall in demand and the prospect of further contraction led to an aggregate EUR405m in exceptional impairment charges in the automobile division and in Faurecia’s vehicle interior business.

2008 capital expenditure and R&D outlays totalled EUR3.8bn. As a result, the group ended the year with negative free cash flow of EUR3,764m.

But PSA insisted the group’s financial structure was solid: “Equity amounted to EUR13,277m at 31 December 2008. The group’s gearing ratio was 22% at year-end, allowing considerable leveraging headroom.”

Automobile division sales and revenue dipped 8.5% to EUR41,643m last year. An operating loss of EUR225m was posted for 2008, compared with a EUR858m profit in 2007.

“Despite an encouraging EUR633m in recurring operating income in the first half of the year, the collapse in sales and the production cuts in the fourth quarter led to an EUR858m recurring operating loss in the second half,” PSA said. The full year operating margin was -0.5% after reaching 2.7% in the first half.

Savings from the CAP 2010 programme (EUR1,414m) were offset by currency effects (EUR324m) and higher raw materials prices (EUR377m).

The group reduced worldwide production by 26% in the fourth quarter and independent dealer stocks fell 20% in 2008 as a result of a group decision to voluntarily limit sales to dealers and to absorb stock costs at group level.

Faurecia’s sales and revenue fell 5.1% to EUR12,011m in 2008 and operating income was down to EUR91m from EUR121m the previous year.

Faurecia made a net loss of EUR569m and has accelerated its recovery plan.

GEFCO reported EUR3,536m in sales and revenue in 2008, down 0.5% compared with 2007, and operating income of EUR127m (versus EUR155m in 2007), reflecting improved cost management and the quick implementation of action plans, which allowed the company to compensate partially for rising fuel prices during the first nine months of the year and reducing production at customer manufacturing plants.

Banque Psa Finance was said to have performed well, with sales and revenue up 4.5% to EUR2,088m in 2008 and able to refinance sufficiently to maintain its commercial activity at 2007 levels. The bank’s market share even rose to 27.3% during the year from 26% in 2007.

However, operating income slipped to EUR557m from EUR608m in 2007.

“Banque PSA Finance’s balance sheet remains solid, thanks to effective credit risk management and the limited impact  of refinancing costs despite the liquidity crisis,” PSA said. “[It] has EUR6bn in undrawn credit lines and maintains a European capital ratio of over 11%.


PSA chairman Christian Streiff said: “Faced with the prospect of a prolonged recession, our priorities are clear. We must concentrate all our efforts on reducing inventory and minimising our cash consumption through our CASH 2009 programme, and we must pursue our initiatives to cut costs as part of the CAP 2010 plan, so that we can return to profit during the course of 2010.

“At the same time, we must prepare for the future by targeting our investments and R&D expenditure to develop new vehicles and new environmental solutions to ensure sustained and profitable growth for PSA Peugeot Citroën once this crisis is behind us. Our intention is to maintain investment and expenditure on automotive R&D at around EUR3.5bn.”
The group expects western European markets to experience a further decline of around 20% in 2009 followed by stability in 2010, noting: “The first half of 2009 is expected to be particularly difficult” with a group loss anticipated.

“CASH 2009 actions will not be enough to compensate for the collapse of markets and the cash costs of restructuring, with the result that free cash flow will be negative in 2009.

“Proactive refinancing with a conservative liquidity policy will allow the group to return to profit whilst building for the future. The group’s funding requirements for the manufacturing and sales activities is therefore expected to be around EUR4bn in 2009. The EUR3bn government loan [announced this week along with aid to rival Renault and already attracting criticism from the EU and other countries – ed], together with the other financing sources, will cover these needs.
“The commercial offensive will be maintained in 2009, with all of the new model launches proceeding as scheduled. These new models are the direct result of CAP 2010 actions and the reduction in vehicle development time.

“Peugeot will make substantial steps to expand market coverage with the new 308 CC, its first crossover (the 3008) and its first compact MPV.

“Citroën will roll out its new ‘Creative Technologie’ brand image and launch the C3 Picasso in early 2009.”

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