The automotive unit of PSA/Peugeot-Citroen may record a loss in the second half of this year due to the impact of the March earthquake in Japan as well as the rising material costs, the company revealed on Wednesday. In addition, the company confirmed that it predicts the European market to remain stable for the whole year.
It has lowered its estimate for growth in China from a previous forecast of 10 percent growth to about 7 percent. China is the largest vehicle market in the world. On the other hand, the company increased its estimate for the Latin American market from 4 percent to around 6 percent growth.
In addition, the company expected the Russian market to increase around 30 percent versus a previous forecast of 15 percent.
The company’s stocks in Paris trading dropped the most in more than two years on Wednesday after the company stopped aiming for a target to increase second-half operating profit at its vehicle-manufacturing division while maintaining a pledge to boost group earnings in 2011.
Chief Financial Officer Frederic Saint-Geours stated that they are encountering “much stronger headwinds” than they expected at the beginning of the year.
Operating profit for the first half of the year increased 1.8 percent, held back by a 23 percent earnings decline at PSA's vehicle manufacturing unit.
PSA also stated that shortages in Japanese components will hurt second-half profit after reducing earnings in the first six months of the year. Analyst Erich Hauser at Credit Suisse Group shared with Bloomberg News that what is new here is that the “Japan impact” is not only limited to the first half of the year.