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Peugeot Quarterly Revenue Drops 7.3% on European Market

Peugeot First-Quarter Sales Drop 7.3% as European Market Shrinks
Peugeot was the third-worst performer among Europe’s major carmakers, with sales falling 17 percent to 407,792 cars. Photographer: Chris Ratcliffe/Bloomberg

PSA Peugeot Citroen, Europe’s second-biggest carmaker, said first-quarter revenue fell 7.3 percent as the company cut prices in response to a contraction in the region’s vehicle market.

Sales dropped to 14.3 billion euros ($18.9 billion) from 15.4 billion euros a year earlier, Paris-based Peugeot said today in a statement. That compared with a 14 billion-euro average of three estimates compiled by Bloomberg. Deliveries fell 15 percent to 691,500 vehicles.

Peugeot set up a vehicle-development alliance in February with General Motors Co., the world’s largest automaker, to address overcapacity and shrinking profitability. A 0.9 percent decline in new-car prices contributed to the sales drop, Peugeot said today. The French company said it will probably cut net debt “significantly” after achieving about half of a 1.5 billion-euro asset-sale plan.

“The results are bad, but there’re not worse than expected, so that’s a relief,” Kristina Church, an analyst at Barclays Bank Plc in London, said in an interview. “The market had been assuming that the pricing would be worse. Management said that they were more confident for the rest of the year, and they sounded on top of the crisis.”

Peugeot rose as much as 5 percent to 9.37 euros and was trading up 3.3 percent at 10:09 a.m. in Paris. That pared the stock’s decline this year to 13 percent.

Regional Performance

Industrywide first-quarter car sales in Europe dropped 7.3 percent to 3.43 million vehicles, according to the region’s automakers association. Peugeot was the third-worst performer among the region’s major carmakers, with registrations falling 17 percent to 407,792 cars. That contrasted with Volkswagen AG, Europe’s largest auto manufacturer, which posted a sales increase of 0.5 percent to 813,522 vehicles.

“The competitive environment remained difficult during the quarter, with pricing pressure similar to the last quarter of 2011, and markets in southern Europe worsened considerably,” Peugeot said. “This environment should last throughout the first half of the year.”

Declines in Europe and Latin America led Peugeot’s drop in first-quarter deliveries. The company’s Chinese car and light commercial-vehicle sales increased 6.3 percent to 109,100 units, while Russian deliveries jumped 22 percent to 19,100. Inventories at the end of March amounted to 70 days’ supply, compared with 58 days a year earlier.

No Recovery Seen

The company reiterated forecasts that the European market will shrink by 5 percent this year, including a 10 percent drop in France. Industrywide car sales will probably rise 7 percent in China, 6 percent in Latin America and 5 percent in Russia.

Europe’s auto market probably won’t recover for years, Chief Financial Officer Jean-Baptiste de Chatillon said today on a conference call. A ban on exports to Iran amid trade sanctions against the country has hurt earnings by 10 million euros a month, he said.

Peugeot outlined a plan in February to cut costs this year by 1 billion euros. A goal of reducing procurement spending by 400 million euros has been 80 percent completed, the company said today in a presentation. Another 600 million euros in fixed-cost reductions is targeted, with 300 million euros in administration and marketing, 100 million euros in research and development and 200 million euros in manufacturing, it said.

‘Too Dependent’

“Peugeot is too dependent on the European market,” Hans-Peter Wodniok, an analyst at Fairesearch GmbH in Kronberg, Germany, said. “What it desperately needs is to close at least one factory in Europe in order to reach its cost reduction target.”

Asset disposals have included the Citer vehicle-rental unit that the carmaker sold to Enterprise Holdings Inc. on Feb. 1 for 440 million euros and an agreement announced April 2 to sell Peugeot’s 48-year-old headquarters building in Paris to Ivanhoe Cambridge for 245.5 million euros.

Peugeot is having “very open” talks with private-equity firms and hedge funds as possible buyers of its Gefco trucking unit, Chatillon said. The division has a “very good market value,” and Peugeot has yet to decide on the size of the stake in Gefco to be sold.

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