French automaker PSA remains profitable despite virus

PARIS: French automaker PSA, which is in the process of merging with Fiat Chrysler, said Tuesday it had remained profitable during the first half of the year despite sales plunging due to coronavirus lockdowns.

The firm – whose brands include Peugeot, Citroen and Opel – managed a net profit of €595 million (US$698 million), a drop of two-thirds from the same period last year.

Sales fell 34.5% to €25.1 billion during the period as stay at home orders by authorities kept clients out of car showrooms. By volume car sales fell 45.7%.

“These past years we have stressed that lowering the breakeven point is a clear strategy for us and the first half of 2020 showed that it is the right strategy in a chaotic world,” chief executive Carlos Tavares said in a conference call.

The company has been focused on boosting profit margins in recent years rather than chasing sales volumes, and it moved to quickly cut costs during the coronavirus crisis.

Operating profits came in at €517 million, a drop of 84.5%, or 2.1% of sales. For strictly automotive sales, the profit margin was 3.7%.

For the 2019-2021 period, the carmaker intends to keep profitability above 4.5% on average thanks to a rebound in sales expected in the second half of this year.

“We still consider this figure as the minimum, with a strong possibility of doing better given the results of the first half,” said financial director Philippe de Rovira.

Tavares expressed confidence in completing the merger with Fiat Chrysler (FCA) and a rebound in the car market.

“We are determined to achieve solid rebound in the second half of the year, while finalising the birth of Stellantis before the end of the first quarter of 2021,” he said in the earnings statement.

Earlier this month the carmakers announced the new group formed by their mega-merger will be called Stellantis.

The tie-up, which was announced at the end of October, will create the world’s fourth-largest automaker in terms of volume, and number three in terms of sales.

Shares in PSA climbed 3.9% in morning trading while Paris’ CAC 40 index dipped 0.1%.