Bloomberg News

Peugeot Lowers Full-Year Profit Target on Pressure to Cut Prices

October 26, 2011

Oct. 26 (Bloomberg) -- PSA Peugeot Citroen lowered its full-year profit forecast as increasing competition to cut car prices in Europe eats into profit.

The recurring operating income in the automotive division will be near breakeven this year compared with an earlier estimate for a profit, the French company said in a statement today. Automotive earnings last year were 621 million euros ($864 million).

“The competitive environment have become more challenging due to pricing pressure, which has intensified in Europe since last September, and the unfavorable impact on the country mix of the fall-off in demand in southern Europe” Peugeot said in the statement.

Peugeot is planning temporary work stoppages at some factories as the European sovereign debt crisis hits demand for vehicles. Peugeot’s sales in Europe plunged 13 percent last month, according to the European Automobile Manufacturers’ Association.

Raw material prices will reduce profit by 700 million euros this year, while the earthquake in Japan will trim another 250 million euros off earnings, the carmaker said.

Full-year free cash flow from manufacturing and sales will be negative, the company said, revising down an earlier prediction for neutral free cash flow.

Peugeot’s third-quarter sales rose 3.5 percent to 13 billion euros.

--Editor: Chad Thomas

To contact the reporters on this story: David Whitehouse in Paris at dwhitehouse1@bloomberg.net; Alex Webb in Frankfurt awebb25@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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