PSA Peugeot-Citroën Revenues Jump 27.5% Y/Y in Q1 as Vehicle Demand Surges

PSA Peugeot-Citroën has recorded a strong increase in its sales revenues for the first quarter of 2010. For the three months ending 31 March 2010, the French automaker has revealed that its revenues for the period have risen by 27.5% year-on-year (y/y) to 14.0 billion euro (US$18.9 billion euro), including eliminations. However, this figure was helped by its Faurecia component supplier unit having consolidated its newly acquired Emcon during the period, but on a like-for-like basis PSA still managed to record sales revenue growth of 22.8% y/y.

Its largest unit, the Automotive Division, recorded strong sales revenues for the period and these were lifted to 10.6 billion euro compared to 8.7 billion euro a year ago, an increase of 22.4% y/y. This was supported by increased demand across the world for its vehicles, with combined sales of assembled vehicles and completely knocked down (CKD) kits rose 28.2% y/y to 914,000 units, with fully built vehicles making up 802,000 units, up 29.6% y/y. In Europe, by far its largest market, vehicle sales increased by 28% y/y to 607,400 units, with the Peugeot brand leading this charge with a gain of 32.7% y/y to 322,900 units. However, PSA's smaller, developing markets continued to offer indications of their strong prospects with percentage gains in Latin America of 20.2% y/y to 60,000 units, and its Rest of the World market gaining 30.3% y/y to 38,400 units. However, as was to be expected in a country which has seen sales balloon by over 70% during the first quarter (see China: 12 April 2010: Chinese Vehicle Sales Rise 55.8% Y/Y During March, Q1 Volumes Surge 71.8% Y/Y), China was PSA's best performing market with an increase of 70.1% y/y, driven by sales of the Citroën brand which saw sales almost double during the period. Sales in Russia remained in the doldrums though, reflecting the difficulties facing the market at the moment, and demand tumbled by 39.2% y/y to just 8,000 units. The company also revealed that it had managed to maintain inventory levels at around 487,000 units, or around 62 days.

Its other units also performed reasonably strongly, with the best performance from a revenues perspective being Faurecia which reported earlier this week (see France: 19 April 2010: Faurecia Sales Surge in Q1, H1 Guidance Lifted), but as noted above this was helped by the consolidation of Emcon. Elsewhere, its GEFCO logistics unit also saw a gain in its revenues of 26.7% y/y to 842 million euro, helped by an increase in sales to other group companies as well as a diversification of its customer portfolio. However, its finance unit Banque PSA Finance saw a slight waning of its revenues during the first quarter as it slipped back by 1.1% y/y to 457 million euro, but saw its loan book increase by 3.2% to 22.9 billion euro, and the number of new loans originated rise by 0.9% to 218,000.

Outlook and Implications

PSA is one of the first European automakers to release financial data for the first quarter and it gives a good indication of what we may expect from others as they continue to trickle out. However, it comes as no surprise to see that the company has recorded strong overall gains in both revenues and units sold given the pressure faced from the effects of the global economic downturn which hit its peak a year ago. This extraordinarily low base line has also combined with the support of the various market incentives that have been introduced around the world since then. While the German scrapping scheme was halted in the second half of 2009, the effect of others such as those which have lifted France, Italy, Spain, and the United Kingdom has continued. The Chinese market has also been supported by its own measures in this direction, as well as the driven by the booming economy as a whole.

However, while the company has said that it is expecting "to report significant recurring operating income for first-half 2010, including a positive contribution from the Automotive Division," it remains to be seen how the company will fare when it enters a largely post-incentive environment in the second half of 2010. It cannot help that it still remains reliant on the European market, which the automaker itself expects to decline by 9%. It hopes though, to continue the strong performance witnessed by new models, and snatch greater market share here as a result. Among the models that are already showing strong performances are the Peugeot 3008 and 5008 multi-purpose vehicles (MPVs), the latest generation of the B-segment Citroën C3 and its premium cousin the DS3. This will be joined by the Peugeot RCZ coupé in due course which gives further indication as to the direction that company is expecting to take in future. The company also has plans to further improve its performance in developing markets, with a host of new models to appeal to local tastes. Among these are the Citroën C5 and the Peugeot 408 in China, the latter also finding its way to Latin America and to be launched alongside the Peugeot new Hoggar pick-up and the Citroën C3 Aircross pseudo sport utility vehicle (SUV). PSA is also undertaking measures to revitalise its business through a range of strategic measures under managing board chairman Philippe Varin. Although PSA may find itself better placed than many this year, its success is likely to depend on how it fares in what is currently a difficult market to anticipate.