PSA Peugeot Citroen has reported a whopping EUR5bn net loss for 2012 after it chose to write-down EUR4.7bn in asset valuations as it continued to feel the effects of lower sales in Europe.

The headline net loss figure compares with an EUR588m net profit in 2011. Group revenues were down 5.2% to EUR55.4bn. 

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Automotive Division revenues declined by 10.3% to EUR38,299m in 2012, in a European market down 8.6%, with high exposure for PSA Peugeot Citroën in severely depressed southern European markets. Overall group sales in Europe fell by 14.8% over the year. Revenues from new vehicle sales declined by 12.4% to EUR27,765m from EUR31,677m in 2011. 

The Automotive Division reported a recurring operating loss of EUR1.5bn in 2012, compared with a recurring operating loss of EUR92m the previous year. PSA said that the loss reflected the contraction in demand (for EUR729m) and the continued adverse impact of raw materials and other costs (for EUR394m), with an overall negative impact from the unfavourable operating environment of EUR1,022m.

However, the company suggested that it has taken the right actions to weather the downturn and highlighted cost-cutting – EUR1.18bn of savings last year – which it said has exceeded targets. It also maintained that product mix was a positive, with the launches of the Peugeot 208, the Citroën DS5, SUVs and four hybrid vehicles extending the line-up. Premium vehicles, PSA maintained, accounted for 18% of sales in 2012, double their share three years ago.

PSA CEO Philippe Varin squarely blamed the European market environment for the weak results, but suggested that the foundations for a company rebound have been laid.

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“The group’s 2012 results reflect the deteriorated environment in the automotive sector in Europe. In this context we have taken the difficult but necessary measures to reorganise our manufacturing base in France. The results of the cost reduction and asset disposal plans have exceeded our targets, highlighting the exceptional commitment of our employees. Finally, our strategic Alliance with GM has entered into execution phase.

“Today, the foundations for our rebound have been laid. We are going to build on the strong identity of our brands and differentiate their customer territories. We are going to focus our investments, actively restore our profitability in Europe and reap the benefits from our investments in growing markets.”

See also: PSA’s challenges laid out