Peugeot maker assures investors it can face market downturn

[PARIS] Peugeot maker PSA Group defied mounting pessimism in the car industry by raising its dividend and offering assurances to investors that it can withstand a deepening slump.

While the French carmaker expects the European auto market to shrink in 2020, it published better-than-expected profit for last year and said it has taken measures to protect the company from a decline.

"Plants are running full speed, the order book is stellar," Chief Executive Officer Carlos Tavares said at a press conference Wednesday. "We are facing this turmoil in a more robust situation" than a few years ago.

PSA earnings contrast with a rapid souring of the global car industry in recent weeks, with China grappling to contain the coronavirus epidemic that has shuttered factories and hobbled supply chains across continents. The company. which plans to combine with Fiat Chrysler Automobiles NV, depends heavily on Europe for its sales, which fell 10 per cent overall to 3.5 million vehicles last year.

Despite the volume drop, PSA's profit margin widened to 8.5 per cent as Mr Tavares focused on lowering costs and selling more expensive models. The 2019 adjusted operating income rose a better-than-expected 11 per cent to 6.32 billion euros (S$9.6 billion). Since arriving in 2014, the CEO has turned around the manufacturer by removing overhead and adding scale.

The results confirm PSA's "best-in-class" status, Oddo BHF analyst Michael Foundoukidis wrote in a note.

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The shares rose as much as 5 per cent, making it the biggest gainer on the STOXX Europe 600 Automobiles & Parts Index.

REUTERS