Peugeot hit by Iran exit

Peugeot maker PSA Group reported a 1.1% decline in first-quarter revenue, as a sales decline outside Europe and currency challenges outweighed pricing improvements.

The French carmaker’s shares fell after it said revenue dropped to €17.98bn in the January-March quarter from €18.2bn a year earlier.

PSA “remains fully focused” on its medium-term performance plan while pursuing the integration of the Opel-Vauxhall business acquired from General Motors in 2017, chief financial officer Philippe de Rovira said. While the Opel deal has bolstered PSA’s European position, overseas sales have suffered from a sustained collapse at its Chinese joint ventures and have been compounded by the carmaker’s withdrawal from Iran last year. Revenue at the core automotive division fell 1.8% to €14.16bn, as vehicle sales by Opel to its former parent tailed off. Exchange-rate setbacks also weighed on revenue to overcome a 3.6% boost from improved pricing and mix, which reflects a sales shift to plusher models.

Those metrics, driven by PSA’s performance in Europe, bode well for its future earnings, some analysts said. “Investors might be willing to look through the weak headline figure, given how key mix is for profitability,” Evercore ISI analyst Arndt Ellinghorst said in a note to clients. The carmaker’s shares nonetheless fell, paring their 30% gain this year. Global sales volumes fell 15.7% to 886,400 vehicles in the quarter. Excluding Iran, deliveries fell 6.1%, weighed down by a 30% decline in Latin America. Overall revenue was broadly in line with analyst estimates in an Infront Data poll, and PSA reiterated its medium-term guidance for an average 4.5% automotive operating margin over the 2019-2021 period. The company said it now expects the Latin American auto market to shrink 2% in 2019. PSA saw the European market as being stable, while it saw China falling by 3% and Russia growing 5%.

PSA plans to discontinue Opel’s Adam, Karl and Cascada models to help meet tightening carbon dioxide emissions regulations, added Mr De Rovira. Earlier this month, the European Commission’s push for a wifi-based standard for cars backed by Volkswagen took a big step forward after MEPs endorsed wifi over 5G technology promoted by PSA, BMW and Qualcomm. The issue has split the auto and tech industries. 5G backers include PSA, Daimler, Ford, Deutsche Telekom, Ericsson, Huawei, Intel, Qualcomm, and Samsung.

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