PSA Peugeot Citroen reported a first-half net loss of €962m ($1.36bn) and forecast a wider full-year drop in its earnings, saying it expected car markets to start recovering only toward the end of 2010.
Peugeot's core automotive division and Faurecia, the supplier group of which it owns 71 per cent, were hit hardest by the collapse in world car sales, but its financing unit Banque PSA was profitable.
The loss at the French carmaker – Europe's second largest after Volkswagen – was in line with most analysts' estimates, and compared with a net profit of €733m a year ago. Peugeot's first-half operating loss was €1.332bn, compared with €1.029bn a year ago.
The company reported positive free cash flow of €467m due to a sharp reduction in its inventory as it slashed production in the first half of this year in response to sharply lower demand.
It said that because of the "difficult operating environment" it expected a recurring operating loss of €1bn-€2bn for the full year, and noted that its positive free cash flow in the first half should be "more than offset" in the second half.
Peugeot said it expected the European car market to contract by about 12 per cent this year – with a second-half drop of 7 per cent – and to start recovering toward the end of 2010.
"PSA Peugeot Citroen's first-half results reflect the impact of adverse markets, which were only partially mitigated by the benefits from performance action plans and new model launches," Philippe Varin, the ex-Corus steel boss who took over as chief executive in May, said in a statement. "Our priority has been to ease our financial constraints by strengthening the group's liquidity."
Mr Varin said that his new executive team had set goals for the group of making Peugeot a "global player", staying a step ahead of competitors in pioneering vehicles and services, and serving as an industry benchmark in terms of operating efficiency.
Government scrappage schemes around Europe helped to mitigate the decline in Peugeot's vehicle sales in Europe, which declined 14.2 per cent in the first half of the year. The group said it expected to boost its market share on the continent above 14 per cent in the second half, thanks to new model launches.
Overseas, the group sold 4.1 per cent more in Brazil in the first half and its sales were 18.4 per cent higher in its relatively small business in China.
Peugeot's automotive division lost €1.326bn, compared with a profit of €575m a year ago. Faurecia reported a consolidated loss of €361m, against a loss of €19m the previous year. Banque PSA's operating profit was €244m in the first half, down from €308m a year ago.
The group's balance sheet was bolstered in the first half this year by a €3bn French government emergency loan and a €400m loan from the European Investment Bank for investments in lower-emission cars. The carmaker issued a €575m convertible bond in the first quarter and a fixed rate bond of €750m earlier this month, and said it had secured liquidity "well in advance" to repay a €1.5bn bond maturing in 2011.
Renault, France's second-largest carmaker, is due to report first-half earnings on Thursday.
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