PSA rebounds but lockdown concerns resurface
French group’s core auto division sales increase but shares slip on country’s impending restrictions
Peugeot owner PSA’s core revenues rebounded in the third quarter, but the French carmaker warned it could be thrown off course by looming new restrictions to curb the spread of Covid-19 in Europe.
PSA said that overall sales in the quarter were down 0.8 per cent compared with the same period last year to €15.5bn. However, sales at its key automotive division were up 1.2 per cent at €12bn.
The number of cars it sold fell but a “strong product mix and pricing policy” — highlighting the renewed focus on more profitable models pushed by chief executive Carlos Tavares — helped keep revenues in the autos division positive.
Revenues had fallen sharply in the first half, with the automotive division down 35.5 per cent as PSA, along with peers, suffered as lockdowns closed dealerships and cut demand for cars.
Philippe Houchois, an analyst at Jefferies, said PSA’s overall revenues were 5.6 per cent above consensus estimates while the auto division revenues were 10 per cent ahead.
The revenue uptick failed to lift PSA’s shares, which slipped 3.8 per cent, mirroring falls on the wider benchmark CAC 40 index as the country awaits new Covid-19 related restrictions likely to be announced by President Emmanuel Macron on Wednesday evening. PSA’s stock has shed more than a quarter of its value this year.
Carmakers’ sales across Europe have improved in recent weeks as economies and dealerships have reopened. But with fresh restrictions looming, analysts are warning the coming months could be challenging.
Philippe de Rovira, PSA chief financial officer, said the group should generate positive free cash flow at the end of the year, and that it planned to increase production in the fourth quarter. However, he warned those plans were “valid except if we face a second major lockdown like in the first half of the year”.
Mr de Rovira added that PSA was working with 25 per cent less inventory than last year as “we want to be sure that if there is a second lockdown, we don’t have cash that is trapped and we don’t want to be forced to make a destocking in a disorderly manner”.
PSA is also merging with Italian-American Fiat-Chrysler, which was agreed last year and will create the world’s fourth-largest carmaker, to be called Stellantis.
EU competition authorities are expected to allow the deal to complete in the first quarter of next year, with Mr de Rovira saying on Wednesday that he saw no other significant obstacles in the way.
The two groups have already agreed to amend the terms of their €50bn merger to preserve more cash within the combined business — by cutting expected payouts to shareholders — to help the carmakers weather the global economic impact of the coronavirus pandemic.
On Wednesday, the companies said they would sell up to a 7 per cent stake in Faurecia, which is 46 per cent owned by PSA, to make sure the new merged group would not own the car parts supplier. The proceeds of the sale and the rest of the shares will be handed out to Stellantis’s shareholders.