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Customer LoginsPSA sees profits surge during H1
Groupe PSA has announced that it has seen its profits surge during the first half of 2016.
IHS Automotive Perspective
- Significance: Groupe PSA has announced that it has seen its profits surge during the first half of 2016 despite a dip in revenues.
- Implications: The results highlight the automaker's ongoing focus on its margins.
- Outlook: PSA will remain focused on the roll-out of its 'Push to Pass' strategy and the targets that it has set as part of it.
Groupe PSA has announced that it has seen its profits surge during the first half of 2016 despite a dip in revenues. For the six months ending 30 June, group revenues dipped by 0.9% year on year (y/y) to EUR27,779 million (USD36,442 million) as it was hit by currency translation. However, at constant exchange rates, growth stood at 2.4%. However, recurring operating income stood at EUR1,830 million, an increase of 32.2% y/y. However, as non-recurring operating expenses declines from EUR343 million to EUR207 million, operating income jumped by 55.9% y/y to EUR1,623 million. Net income for the period now stands at EUR1,212 million, a gain of EUR571 million.
Its key Automotive Division was not helped by currency exchange rates having recorded a fall of 1.1% y/y to EUR19,190 million. However, at constant rates, the revenue growth was up 2.5% y/y. It was not helped by a dip in its global light vehicles sales of 0.2% y/y to 1,544,204. There were said to be some benefits though from the success of some models and its "pricing power strategy". Its recurring operating income has improved by 33.6% y/y to EUR1,303 million, a margin of 6.8%. It has seen its profits grow on the back of strong market demand in some regions and a further reduction in production, procurement and selling, general and administration (SG&A) expenses. However, as well as foreign exchange rates, it also saw a hit from country mix. PSA added that it has also managed to maintain its inventory levels at 399,000 units.
Its Faurecia component supply business has also seen a strong first half. Although sales revenues for this period have grown by just 0.5% y/y to EUR9,532 million, its recurring operating income has jumped by 28% y/y to EUR490 million, which has helped its margin increase from 4.0% to 5.1%.
Separately, the Banque PSA Finance consumer credit business has seen a decline in its sales revenues of 12.1% y/y to EUR737 million. However, its recurring operating income improved marginally by 1.0% y/y to EUR297 million. Overall, the number of new leasing and finance contracts generated during the first half has grown by 8.8% y/y to 400,338.
Outlook and implications
In its first full financial results following the announcement of its 'Push to Pass' strategy, the automaker has shown that the company continued focus on costs, particularly in its Automotive division. Indeed this is underlined by the benefits to its recurring operating expenses which were lifted by EUR431 million in terms of production and procurement and a further EUR183 million with regards its SG&A expenditure. Carlos Tavares, the chairman of the managing board of Groupe PSA further underlined this in a statement, saying: "Our continued performance reflects the success of the company's structural transformation, its efficiency, and the profound change of spirit within the Group."
There are already suggestions that the automaker will keep a close eye on this in the wake of the UK's decision to vote to leave the European Union (EU) and the disruption that this could cause. This has included looking at price hikes in the UK to reflect the weaker pound versus the euro, while two days of stoppages at its Poissy (France) site scheduled for the second half of 2016 are said to be just in case this significantly disrupted sales. Nevertheless, the automaker has reiterated that the business is far better placed to survive any downturn than it has been previously with a breakeven of recurring operating income (excluding China) standing at just 1.6 million units. It is also intending to take EUR700 worth of costs out of its vehicles between 2015 and 2018, with EUR211 already taken out during 2015. It also sees its pricing power in Europe being a benefit as it is said to be well ahead of its benchmarks and its current plan for Peugeot and in line with its expectations for Citroën.
Looking forward to the rest of the year, its operational targets are related to that of its current strategy, with plans to achieve an average Automotive recurring operating income of 4% between 2016 and 2018, while reaching a target of 6% by 2021. Furthermore, it plans to deliver 10% growth in group revenues between 2018 against 2015, with a target of 15% increase set for 2021. This will be supported by the roll out of new models in Europe − most notably the Peugeot 3008 and Citroën C3 − and the reversal of the declines that it has seen in a number of its other markets. China will be a key one given the size of falls during the first half of 2016. As well as volumes, here PSA aims to grow its returns by improving productivity by 30% at its joint ventures (JV) with Dongfeng as well as launching four new sport-utility vehicles (SUVs) between 2017 and 2018 which will take it in to "higher profit pools." It is also now making a big play to grow in Iran with both Iran Khodro and SAIPA.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.