Daily Management Review

Peugeot Maker PSA Reports Record Profitability For 2019 As It Pushes For Merger With Fiat


While announcing a record high for its profitability for 2019, owner of the Peugeot brand PSA Group warned of dropping sale industry wide in Europe for the current year even as the company is pressing forward with its proposed merger with merger with Fiat Chrysler. The deal will help the company to take advantage of the strong market position of Fiat Chrysler in North America.
The integration of its acquisition of Opel and Vauxhall has enabled the company to cut down on costs in areas such as the procurement of components which has helped it to boost its operating margins to touch 8.5 per cent for 2019, PSA said.
The company managed to sell more of its pricier SUV models which helped it to offset a slump in vehicle sales, said the group which is also the maker of the cars under the Citroen and DS brands. The company informed that last year, it had managed to lift revenues by a higher-than-expected 1% to 74.7 billion euros or $81.2 billion from sale of the costlier SUVs which included the launch of the Citroen C5 Aircross.
This helped the group stand out in the industry in which a number of rivals – including France's Renault, have struggled to cope with dropping demand and sales because of broader slowdown in the global auto industry.
There was a 13.2 per cent growth in the net profit for PSA Group at a record 3.2 billion euros that prompted the company to enhance its dividend against 2019 results to 1.23 euros per share which was 58 per cent more than the dividend announced the year before.
Analysts at brokerage Oddo-BHF said in a note that the carmaker was "once again very solid" and added that the latest results reaffirmed its position of "best-in-class status."
PSA however warned of a 3 per cent drop in sale and revenues for its Europe business, its largest market by far, for the current year of 2020. The merger with Fiat Chrysler will however open up greater access of the company to the North American market where its partner has a storing presence with brands like Jeep.
The merger, which was announced approved by the two companies last December, will create the fourth largest auto company of the world and will enable both the companies to better deal with market upheavals and reduce burden of investment of developing lower pollution causing vehicles as well as electric vehicles to meet stricter environmental regulations. A more upbeat result than most rivals was also posted by Fiat this year.
The two groups were well placed to face market challenges together because they are both in good shape, said PSA boss Carlos Tavares at a news conference.
There will not be any substantial regulatory hurdles to the completion of the deal, he said, and added that so far the companies have filed 14 approval requests to competition authorities across the world out of the 24 that it needs to approach in total. He also added that there are no current plans to make any changes to the large brand portfolio that both the companies currently have.