Peugeot maker PSA Group defied mounting pessimism in the auto industry by raising its dividend and offering assurances to investors that it could withstand a deepening slump.
While the French automaker that is working to combine with Fiat Chrysler Automobiles NV expects the European market to shrink this year, it published better-than-expected profit for last year and said that it has taken measures to protect the company from a decline.
PSA reported record net income of 3.2 billion euros (US$3.48 billion) compared with 2.83 billion euros a year earlier. The group’s adjusted operating income of 6.32 billion euros beat an average forecast of 6.14 billion euros of analysts surveyed by Bloomberg.
PSA earnings contrast with a general souring of the global auto industry in recent weeks, with China grappling to contain a COVID-19 outbreak that has shuttered factories and hobbled supply chains across continents.
The company depends heavily on Europe for its sales, which fell 10 percent overall to 3.5 million vehicles last year.
Despite the drop, PSA’s profit margin widened to 8.5 percent amid chief executive officer Carlos Tavares’ relentless lowering of costs and focus on selling expensive models.
Adjusted operating income last year rose a better-than-expected 11 percent to 6.32 billion euros.
The company kept a target for the 2019-2021 average automotive adjusted operating margin of more than 4.5 percent, a level chief financial officer Philippe de Rovira called a “floor” and very conservative.
“Our internal target is always to improve performance, so let’s not be misled by this indicator,” he said on a call with reporters.
In the past, the margin has been boosted by excluding restructuring charges from operating profit, Bloomberg Intelligence analysts have said.
The company has reported charges for cost cutting at Opel and Vauxhall, but also Peugeot, Citroen and DS. Last month it unveiled job reductions at Opel.
The French manufacturer sees the European market shrinking 3 percent this year and Russia declining 2 percent.
That is more than the 2 percent decline in Europe expected by the main lobby group, a forecast published before the extent of the virus outbreak became known.
Other European automakers have so far signaled a mixed year at best.
While Daimler AG has forecast an earnings rebound following several profit warnings and a dividend cut, it has also warned of more possible regulatory costs in coming months and “significant adverse effects” from the virus outbreak in China.
German luxury-vehicle rival BMW AG is sticking to its sales growth target for China, even as it acknowledged uncertainty about when the situation would return to normal.
PSA’s French rival, Renault SA, earlier this month posted its first annual loss in a decade and indicated that operating margins are set to shrink.
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