Peugeot Shares Fall as New Profit Targets Disappoint

PSA Peugeot Citroen CEO Carlos Tavares pictured in February. The company announced its new five-year strategic plan on Tuesday. ENLARGE
PSA Peugeot Citroen CEO Carlos Tavares pictured in February. The company announced its new five-year strategic plan on Tuesday. Photo: Reuters

PARIS—Shares in PSA Peugeot Citroën declined by up to 7% on Tuesday as profit margin targets the French car maker announced in its new five-year strategic plan disappointed investors.

After a faster-than-expected turnaround in which the company has transformed from a money-loser to one of the industry’s most profitable in a span of two years, Peugeot now predicts it will be slightly less profitable in the coming years than it was in 2015.

In its new plan dubbed “Push to Pass,” Peugeot said it expects an average operating profit margin of 4% for its automotive division over the next three years, below the 5% it already achieved last year. The company is forecasting slightly lower margins as it invests to expand in emerging markets, especially in Iran, North Africa, India and Southeast Asia.

“We don’t believe the plan will have PSA investors ecstatic—more a story of steady progress,” wrote analyst Arndt Ellighorst at Evercore ISI, pointing out that the profit margin targets were below analysts’ expectations.

The plan calls for revenue growth of 10% by 2018 through the launch of 26 new passenger cars and light commercial vehicles, including electric vehicles, plug-in hybrids and a pickup truck. The company expects the new product blitz to boost revenue 27% by 2021 from 2015 levels.

“Based on our financial reconstruction, we will launch a global product and technology offensive. Now more agile, we are ready to shift paradigms by anticipating changes in car usage patterns,” said Chief Executive Carlos Tavares.

After achieving its turnaround plan three years ahead of schedule, the new strategy marks the company’s transition into growth mode after having successfully stabilized the business.

Among the new cars are seven plug-in hybrids, four electric vehicles and a one-ton pickup truck—all product categories that Peugeot currently doesn’t make.

Peugeot said it can accomplish this new slate of vehicle launches while keeping a lid on research and development costs. It expects to achieve a 4% average operating profit margin over the next two years and a 6% margin by 2021.

Write to Jason Chow at [email protected]


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