Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Peugeot raises cash goal after strong recovery progress

Published 18/02/2015, 13:45
© Reuters. PSA Peugeot Citroen CEO Tavares attends the company's 2014 annual results presentation in Paris
BNPP
-
PEUP
-
0489
-

By Laurence Frost

PARIS (Reuters) - PSA Peugeot Citroen (PA:PEUP) took a bigger-than-expected step towards recovery on Wednesday, raising a key cash-flow objective after strong China sales and a European upturn helped the French carmaker beat expectations for 2014.

Peugeot pledged to rack up 4.2 billion euros (3.10 billion pounds) in operating cash flow from 2014 to 2017, more than double its earlier 2018 target after the auto division returned to profit on a 1 percent sales gain to 53.6 billion euros.

"We are ahead of our reconstruction plan," Chief Executive Carlos Tavares said in a statement.

The manufacturing division swung to a 63 million euro operating profit from a 1.04 billion loss, with the overall net loss narrowing to 555 million from 2.23 billion. Group operating income also turned positive to the tune of 905 million euros.

Heavily reliant on Europe for sales and production, Paris-based Peugeot survived the region's prolonged slump only after a 3 billion euro share issue, in which the French state and China's Dongfeng (HK:0489) took 14 percent stakes last year.

In response, new boss Tavares pledged to trim the model lineup, cut plant capacity, raise pricing and pare wage and component costs to lift the automotive operating margin to 2 percent in 2018 and 5 percent by 2023.

Peugeot posted 2.18 billion euros of operating free cash flow for 2014 after burning through 426 million a year earlier. That well exceeded the 500 million expected by analysts, according to a consensus published by Exane BNP Paribas (PARIS:BNPP).

Dominic O'Brien, an analyst at the brokerage, said the big surprise was the auto division's continued profitability in the seasonally weaker second half of 2014.

"This is a very strong set of free cash flow numbers," O'Brien said. "Pursuing profitability over sales volumes is starting to reap some rewards."

Peugeot shares have risen 32 percent since Jan. 1, buoyed by recovering demand in Europe which still accounts for 60 percent of sales. China also contributed to last year's 4.3 percent rise in global deliveries.

The company also reported progress on several benchmarks. Labour costs fell to 13.4 percent from 14.5 percent, on track for a 12 percent goal. Inventory fell by 1.4 billion euros, already exceeding the 1 billion cut pledged for 2016.

Savings per vehicle reached 730 million euros, outstripping a 600 million euro target, while the utilisation rate in Peugeot's European plants rose to 79 percent from 72 percent.

© Reuters. PSA Peugeot Citroen CEO Tavares attends the company's 2014 annual results presentation in Paris

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.