Peugeot vows new profit plan with restructuring complete

Bloomberg

PSA Peugeot Citroen will set new growth goals after cost-cutting and recovering demand in Europe helped the French automaker beat targets set two years ago following a bailout.
Automotive operating profit last year was 5 percent of revenue, far exceeding a 2 percent margin goal for 2018, the company said in a statement Wednesday. Free cash flow was almost double the target set through 2017. The carmaker will issue its profit plan on April 5 and said it will start paying a dividend in line with the industry from this year’s earnings, its first since 2011.
The result “puts our company back in the race and proves its potential,” Chief Executive Officer Carlos Tavares said in the statement. “We will be able to harness this strength when implementing our new plan for profitable growth.”
The shift to expansion comes after two years spent stabilizing the business. Peugeot shut a plant, cut jobs and froze pay after a bailout by the French state and China’s Dongfeng Motor Corp. in 2014. The planned dividend is a sign the company believes the turnaround is now sustainable despite a slowdown in China, the world’s biggest auto market, and the diesel emissions scandal at Volkwagen AG. While Peugeot has denied cheating, more than half its European sales rely on the engine type.
The shares rose to a six-week intraday high and traded up 3.6 percent to 14.155 euros at 9:38 a.m. in Paris.
“This is a major beat to expectations,” Arndt Ellinghorst, a London-based analyst for Evercore ISI, wrote in a note.
The margin was the highest since 2002, Chief Executive Officer Jean-Baptiste de Chatillon said on a conference call with reporters. The carmaker benefited from paring down its product range to 39 models from 45 cars in 2014, he said.
“We are finalizing our economic reconstruction,” de Chatillon said.