Profit jumps at PSA ahead of Fiat merger programme

Peugeot maker PSA Group has weathered the weaknesses in the automobile sector and able to register remarkable results. Besides, its merger partner Fiat Chrysler said that cornonavirus outbreak has not halted Italian production.

PSA Group said profitability reached fresh highs in 2019, though the French firm underscored a gloomy outlook for car sales in markets like Europe this year as it pursues its merger with Fiat Chrysler.

PSA, which also produces cars under the Citroen and DS brands, has trimmed costs in areas such as purchasing as it integrated its acquisition of Opel and Vauxhall, boosting operating margins to a record 8.5% last year.

It also offset a slump in vehicle sales by selling pricier SUV models, with launches including the Citroen C5 Aircross helping to lift revenues by a higher-than-expected 1% to 74.7 billion euros ($81.2 billion).

That has helped it stand out in a car market where some rivals including France’s Renault have struggled with sliding revenues and profits, amid a broader downturn in demand.

PSA’s group net profit increased 13.2% to a record 3.2 billion euros, and the company increased its dividend against 2019 results to 1.23 euros per share, up 58% from 2018 levels.

Fiat also posted more upbeat results than most earlier in February. PSA and Fiat struck a deal in December to create the world’s fourth biggest carmaker, in a bid to better cope with a market turmoil and the cost of making less-polluting vehicles.

The two still face headwinds this year, including as the coronavirus outbreak in China paralyses production in the country and hits carmakers’ supply chain, and with PSA forecasting a 3% contraction in Europe’s car market this year.

PSA Financial Chief Philippe de Rovira said the impact of the coronavirus crisis was still difficult to assess. The firm’s factories in Wuhan, at the epicentre of the outbreak, were currently due to reopen in the second week of March, he added.

PSA had already suffered a total 700 million euros in losses and writedowns in China in 2019, where its car sales have tumbled, and where it is exiting a joint venture with China’s Chongqing Changan Automobile.

Meanwhile, Fiat Chrysler has so far not interrupted production in Italy following a coronavirus outbreak in the country, and is about to restart operations at its Serbian plant, European chief Pietro Gorlier said on Tuesday.

Cases of coronavirus in Italy, the worst affected country in Europe, rose to more than 260 on Tuesday, with seven deaths.

Chief Operating Officer for the EMEA region Pietro Gorlier, speaking during an event at FCA’s plant in Pomigliano d’Arco near Naples where it produces the hybrid version of the Panda small car, said that the automaker was closely monitoring the situation, local media reported.

“Until a week ago we mainly handled the Chinese side of the crisis, which we basically managed to overcome,” Gorlier was reported as saying.

“Clearly there are updates every day and we’re monitoring the situation in Italy. We’re confident we’ll manage to overcome these problems”.

The quotes were confirmed by a FCA spokesman.

Coronavirus cases in Italy have so far mainly been reported in the regions of Lombardy and Veneto, where Fiat Chrysler doesn’t have plants.

“We’ve no interruptions at the moment and we’ll also restart production in Serbia, which we had postponed,” Golrlier said.

The spokesman said that production in Serbia would resume on Thursday.

The group earlier this month said it had temporarily halted production at the Serbian plant in response to a shortage of certain components sourced in China, the first such suspension by an automaker in Europe.

FCA last week restarted production at plants it operates in China through its joint venture with Guangzhou Automobile Group (GAC).

Gorlier also said the automaker planned to start producing the Tonale, Alfa Romeo’s new compact SUV, in Pomigliano in the second half of next year.

He added that FCA - which has agreed a $50 billion merger with Peugeot maker PSA - confirmed its 5 billion euro investment plan for Italy to 2021.

“Until we have completed the merger, we will continue to be two separate companies,” Gorlier was reported as saying.

Fiat Chrysler Automobiles Chief Executive Mike Manley received compensation of 13.28 million euros ($14.45 million) for 2019, in line with a target set by the company, the Italian-American automaker said in a filing on Tuesday.

Reuters