PSA/Peugeot-Citroen posted EUR905 million in group operating income in 2014, a reversal from the EUR364 million in losses last year. It also managed to significantly trim its net loss to EUR555 million from EUR2.23 billion in 2013. PSA's vehicle manufacturing division managed to turn around from EUR1.04 billion loss in 2013 to a EUR63 million operating profit in 2014.
The group posted a 1-percent surge in net revenue to EUR53.6 billion in 2014, although its automotive division revenue dropped 0.9 percent to EUR36.1 billion. The carmaker said that favorable changes in the product mix and in prices offset a very negative currency effect.
PSA chief executive Carlos Tavares said in a statement that the results show that the process of rebuilding the group's financial fundamentals is underway, adding that the carmaker is ahead of its reconstruction plan. With the encouraging results, PSA is now expecting to deliver EUR4.2 billion in cumulative operating cash flow by 2017, which is more than double its earlier 2018 target.
PSA said that its operating free cash flow, excluding one-time gains and charges, was EUR2.18 billion in 2014 and it was net debt free. Analysts had expected PSA to have a group operating cash flow of EUR500 million for 2014, according to a consensus published by Exane BNP Paribas.
According to Kristina Church, an analyst at Barclays, while it is “great” that PSA is generating some cash, but it needs to start showing that cash is sustainable.” Dominic O'Brien, an analyst at Exane BNP Paribas, remarked they were surprised the auto division managed to maintain its profitability in what is considered as the seasonally weaker second half.
"Pursuing profitability over sales volumes is starting to reap some rewards," O'Brien said. In 2014, PSA also managed to trim labor costs to just 13.4 percent of revenue from 14.5 percent. The French carmaker was also able to reached a per vehicle savings per vehicle of EUR730, which is already more than the EUR600 target for 2016. Likewise, PSA was able to use more of its plants in Europe, with the utilization rate jumping to 79 percent from 72 percent.