PSA Group says strong rebound under way

Peugeot maker PSA Group delivered a profit in the first half of the year even as the Covid-19 pandemic hit revenue and said a strong sales rebound in June had extended into July.

The French car maker, which suffered like rivals as dealerships closed and which halted production as the outbreak spread from China to Europe and the US, also said on Tuesday it was sticking with its midterm profit margin target.

“June has been a very strong rebound in sales and July is seeing a similar trend,” financial chief Philippe de Rovira told reporters. CEO Carlos Tavares added order books were “excellent” at the end of the first half.

PSA shares were up more than 3% in early trading.

The group, which is in the middle of working through a merger agreement with Italy's Fiat Chrysler Automobiles (FCA), reiterated a goal for average margins of over 4.5% in its automotive unit for 2019-2021.

That was despite a 34.5% plunge in revenue in the first six months of 2020 to €25.12bn (roughly R486.6bn), when the automotive division's adjusted operating margin shrank to 3.7% from 8.5% at the end of 2019.

PSA's profitability has eclipsed that of some rivals including France's Renault in recent quarters, helped by a focus on pricier models like SUVs.

Under Tavares, PSA has kept a tight lid on production costs, and executives said on Tuesday the operational break-even point — which had reached 53%, meaning the firm could still generate cash with half its usual car volume — would be even lower in 2020.

The group's net profit for the first half of 2020 also stayed in positive territory, at 595 million euros, down from €1.83bn (roughly R35.4bn) a year ago.

Stellantis on track:

Tavares told analysts the merger with FCA — which is set to create the world's fourth largest car maker under the name “Stellantis” — was still on course to close in the first quarter of 2021.

Earlier this month, EU antitrust regulators suspended their investigation into the proposed merger while waiting for data.

Asked about possible concessions to get the deal over the line, Tavares said if anything needed to be done, it would be, adding PSA would not be “picky” and it was keeping an open mind in its discussions with the European Commission.

Competition authorities have been examining FCA and PSA's combined market share in vans in particular.