Peugeot profits beat forecasts
PARIS, France (Reuters) -- French car maker PSA Peugeot Citroen reported a slide in 2003 profits on Wednesday due to a dearth of new models and a strong euro, but its shares rose more than five percent as the figures beat forecasts.
Europe's second-biggest car maker said its net profit fell a smaller-than-expected 11 percent to 1.497 billion euros ($1.91 billion) last year, while operating profit fell 25 percent to 2.195 billion euros, also better than expected.
PSA, a former sector star which shattered its reputation as Europe's most reliable performer amongst the mass car makers with a double profit warning this year, said it expected moderate sales growth in 2004 and overall operating profit similar to last year's level.
PSA's shares, which rose four percent last year and lagged a 23 percent rise by an index of European peers, were trading up 4.95 percent at 39.84 euros at 1130 GMT.
Investors attributed the rise to the better-than-expected profits and to relief that the company had not sprung any more nasty surprises about its profit outlook.
"The results are better than expected and the market was fearing another warning,'' said a Paris-based fund manager.
But analysts cautioned against reading too much into the share price rise, with some noting that it was merely recovering following a substantial drop at the start of the year.
"The numbers are slightly above expectations but bear in mind guidance had already been revised down twice,'' said Robert Ashton, autos analyst at Commerzbank who rates the stock 'equal-weight'. "The outlook is pretty dull. Flat margins this year aren't going to set anyone on fire.''
After several years of robust growth under Chairman Jean-Martin Folz, PSA was hit in 2003 as motorists shunned its aging models for the snazzier offerings of rival manufacturers.
Operating profit at its core autos business tumbled 41 percent to 1.28 billion euros in 2003, yielding an operating margin of 2.93 percent, just short of a key target of three percent and down from five percent in 2002.
Compatriot Renault posted forecast-beating 2003 results on Tuesday and forecast profit margin growth in 2004 thanks to the success of its new Megane range and a hefty contribution from its Japanese partner Nissan.
Excluding the effect of new accounting rules, however, PSA is still the more profitable company.
Last year, PSA was hit to the tune of 567 million euros by a strong euro versus the British pound and Latin American currencies, and also suffered from a weak car market in western Europe, particularly in its home market of France.
It said neither the impact of a strong euro nor sluggish demand in western Europe was likely to improve in the first half of 2004, when sales and earnings should be similar to the second half of 2003.
But new models later in 2004 would boost business at the autos division and should have "a significant impact on market share and margins'' in the second half, PSA said.
"All in all, 2004 will be a year of transition, paving the way for a return to more resounding growth in 2005,'' PSA said in a statement.
Folz told reporters he expected the European car market to be relatively stable this year.
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