Peugeot drives to profit despite pandemic hit

Peugeot maker PSA announced a profit of €595m for the first six month of 2020, down from €1.83m last year 
Peugeot drives to profit despite pandemic hit
Despite a drop in sales, Peugeot made a €595m profit from January to June 2020

Peugeot maker PSA delivered a profit in the first half of the year even as the Covid-19 pandemic hit revenue, and said a strong sales rebound in June in its core European markets had extended into July.

The French carmaker, which suffered like rivals as dealerships closed and which halted production as the outbreak spread from China to Europe and the US also said it was sticking with its mid-term profit margin target.

“June has been a very strong rebound in sales and July is seeing a similar trend,” financial chief Philippe de Rovira told reporters.

Chief executive Carlos Tavares added order books were “excellent” at the end of the first half, boosted by pent-up demand for new versions of its Peugeot 208 model and Opel’s Corsa after coronavirus lockdowns eased.

New figures showed a surge in export expectations among German automakers, adding to signs of a strong sector recovery. However, troubled Japanese manufacturer Nissan forecast a record annual operating loss.

PSA is in the middle of working through a merger agreement with Italy’s Fiat Chrysler which will open it up further to other markets like the US.

The French group reiterated a goal for average margins of over 4.5% in its automotive unit for 2019-2021, even though these were down to 3.7% in the first half from 8.5% at the end of 2019.

PSA’s profitability has eclipsed that of some rivals including France’s Renault in recent quarters, helped by a focus on pricier models like SUVs.

Tight production costs mean PSA can generate cash with half its usual car volume 

Under Mr Tavares, PSA has kept a lid on production costs, and executives said on Tuesday the operational breakeven point - which had reached 53%, meaning the firm could still generate cash with half its usual car volume - would be even lower in 2020.

The group’s net profit for the first half of 2020 also stayed in positive territory, at €595m, down from €1.83bn a year ago.

Revenues, meanwhile, fell 34.5% to €25.1bn.

PSA said it was experimenting with more online sales, including with its own employees in France and across Europe, and expected this to become a growing part of its business.

Mr Tavares told analysts the merger with FCA - set to create the world’s fourth largest carmaker under the name “Stellantis” - was still on course to close in the first quarter of 2021.

Earlier this month, EU competition regulators suspended their investigation into the proposed merger while waiting for data.

Asked about possible concessions to get the deal over the line, Mr Tavares said if anything needed to be done, it would be, adding PSA would not be “picky” and it was keeping an open mind in its discussions with the European Commission.

Competition authorities have been examining FCA and PSA’s combined market share in vans in particular.

More in this section

Lunchtime News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up