Published on October 2nd, 2011 | by Daniel Sherman Fernandez0
PSA/Peugeot Citroen shares DECLINE, expanding the gap with VW to 91 Euros
Because of investor predictions that PSA/Peugeot-Citroen would be the automaker to be hit the worst by the sovereign debt crisis in the region, its share price has dropped so much that it is trading at a record discount to Volkswagen AG. So far this year, PSA has dropped by 41% this year, the sharpest drop among European automakers, widening the gap to Volkswagen’s shares to 91 Euros from an average of 16 Euros for the last decade. Its current market value is 3.8 billion-euro ($5.2 billion), which is less than one-tenth of 2010 annual revenue of 56 billion Euros. Investors said that efforts undertaken by CEO Philippe Varin on expanding the market to lessen its reliance on Europe may be too late to stop PSA from feeling the impact of the downturn. PSA is the Europe’s second-largest automaker after VW. In the first half, the operating margin at Peugeot’s automotive division dropped to 1.8 percent from 2.5 percent. Lorenz Blume an analyst at Stuttgart-based LBBW Asset Management, said that Peugeot’s margins “blow away” with “any kind of wind.”
In the first half of the year, LBBW Asset Management had offloaded 190,000 Peugeot shares and it currently holds 3,600 among its 18 billion Euros of investments. He added, “There’s no such thing as too cheap if they’re going to burn cash again.” In the first half, Peugeot posted a free cash flow in the first half that was a negative 179 million Euros. Last July, it predicted a figure “close to neutral” for the entire year. In the last downturn, PSA posted 3.76 billion Euros in negative cash flow in 2008. It also reported a 343 million-Euro net loss, forcing Varin to pledge cost cuts and a sales increase to lessen the gap with its peers.