Peugeot's net profit skids in 2004

23rd February 2005, Comments 0 comments

PARIS, Feb 23 (AFP) - French automaker PSA Peugeot Citroen on Wednesday reported a 9.35 percent fall in net earnings last year and warned that higher raw materials prices could weigh on 2005 results.

PARIS, Feb 23 (AFP) - French automaker PSA Peugeot Citroen on Wednesday reported a 9.35 percent fall in net earnings last year and warned that higher raw materials prices could weigh on 2005 results.

The report exerted sharp downward pressure on auto shares, with Peugeot plunging 2.21 percent to EUR 66.40 in mid-morning trading and rival Renault down 2.40 percent at EUR 49.16. The overall market in Paris was down 1.41 percent at 3,956.89.

"The negative factor in the (Peugeot) report is the forecast, which remains weak, even though it foresees an operating margin (in 2005) of between four and 4.5 percent," commented ananlyst Pierre-Yves Quemener of the bank CIC.

"This is essentially due to higher raw materials costs than in 2004."

While it expects to cut costs this year, Peugeot said Wednesday that higher prices for raw materials would add between EUR 250 million (USD 330 million) and EUR 300 million in 2005 to its expenses.

Peugeot posted net profit in 2004 of EUR 1.36 billion (USD 1.8 billion), down 9.35 percent from 2003. The result was nonetheless in line with analysts' forecasts of a 9.3 percent decline, according to a survey by JCF.

The group said operating profit fell 1.44 percent to EUR 2.18 billion, compared with EUR 2.21 billion in 2003, on sales of EUR 56.8 billion, up4.7 percent from EUR 54.24 billion.

The operating margin slipped to 3.8 percent from 4.0 percent in 2003.

Looking ahead, Peugeot said it was targeting a 2005 operating margin of between 4.0 and 4.5 percent and "moderate growth in sales."

While the automobile market was expected to be stable, with a slight upturn in western Europe, PSA Peugeot Citroen said it was forecasting "a continuation of a sustained competitive climate."

"It's very cautious, despite a renewed range of models," Jean-Marc Dutu, a portfolio manager at Meeschaert Asset Management, said of the forecast.

"The group is very cautious because competition will remain intense in Europe in 2005," he added.

But according to Quemener of CIC, Peugeot's share price could well rebound.

"Despite the weak targets in terms of operating margin in 2005, the group should manage to compensate for the impact of raw materials prices," he said, adding that his "buy" recommendation on Peugeot was unchanged.

Peugeot said it planned to continue rolling out new models to add to two presented in the second half of last year.

Peugeot, which sold better as a brand than Citroen, plans to launch three new models in 2005, while Citroen has two new cars ready.

The group's non-automobile subsidiaries helped boost its bottom line in 2004, with the Gefco transport division raising its operating profit 9.1 percent to EUR 156 million.

The equipment unit Faurecia boosted its operating profit 20 percent to EUR 366 million.

© AFP

Subject: French News

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