Is PSA now set to “push-for-pass” on Proton?

For the third year, the PSA Group has achieved growth of the Automotive division operating margin to 6 per cent 5% in 2015; growth in vehicle sales to 3.15 million, up 5.8 per cent; and growth of its net financial position due to €2.7 billion free cash flow; and finally a group recurring operating income up 18 per cent compared with 2015 of €3,235 million.

And, for the first time since 2011, PSA Group is declaring a dividend of €0.48 per share to be submitted for approval at the next Shareholders’ Meeting.

With such a glowing set of results, just in time for PSA's bid for beleagured Opel, has come in time for some to ask: Is PSA Group about to mount an attack on Malaysian-based Proton?

For it seems that while talks with Opel progress, and workers at Vauxhall and Opel fret about their jobs, PSA Group is “pushing ahead” with a separate bid for Proton. The manufacturer confirmed to Automotive World that it has “submitted a bid to go further with Proton.” While the nature of its bid is vague at this stage, Proton has been clear about its need for an investor. So it could be that PSA is making bids for two ‘troubled’ automakers – Opel and Proton.

The Malaysian government granted the struggling OEM Malaysian Ringgit 1.25 billion (US$280 million) in financial aid last April to help pay its suppliers. At the time, Proton said it was on the lookout for a foreign strategic partner (FSP).

At the moment, according to AW, it looks to be boiling down to a race between PSA and Geely. Media reports have claimed that Geely, which already owns Volvo, is the favoured party but Proton’s parent DRB-Hicom squashed these reports, stating that it “hopes that the public will not be misled by various reports that we have already selected a FSP for our wholly-owned carmaker, Proton. At present, we are focussed on going through the critical process of identifying the ideal FSP for Proton, and an announcement of the decision will be made in due course.” An announcement is expected by the end of the first half of the year.

                                   Turnaround king achieves growth

Meanwhile, ‘turnaround man’ Carlos Tavares, chairman of PSA Group Managing Board, comments: “These (PSA Group) results demonstrate our ability to consistently deliver an excellent performance in an adverse environment. They are the outcome of the Group’s operating efficiency improvement and our competitive teams’ focus on the execution of the “Push to Pass” plan. Day after day, the Group is building the conditions for profitable and sustainable growth, reinforced by the success of the first launches in its product offensive.”

In 2016, Group revenues were €54,030 million compared to €54,676 million in 2015 and Automotive revenues were €37,066 million, compared to €37,514 million in 2015 which represent respectively a growth of 2.1 per cent and 2.7 per cent, at constant exchange rates, driven notably by the success of recently launched models and the Group’s pricing power strategy. Net of adverse change in exchange rates, both Group and Automotive revenues were down 1.2 per cent.

The Group recurring operating income was €3,235 million, up 18 per cent compared to 2015. The Automotive recurring operating income was €2,225 million, up 19 per cent compared to 2015. In an environment characterised by adverse exchange rates, this growth was driven by higher volumes, positive price and mix effects, and lower fixed and production costs.

The Group non-recurring operating income and expense was a charge of €624 million, compared to a charge of €757 million in 2015.

Net financial income and expense was a charge of €268 million versus a charge of €642 million in 2015. Net income reached €2,149 million, an increase of €947 million compared to 2015. Net income, Group share, reached €1,730 million compared to €899 million in 2015.

At the same time, Banque PSA Finance reported recurring operating income of €571 million (5), up 11 per cent versus 2015, while parts maker Faurecia’s recurring operating income was €970 million, up 17 per cent. And the free cash flow of manufacturing and sales companies was €2,698 million.

The PSA group’s total inventory, including independent dealers, stood at 406,000 vehicles at 31 December 2016, an increase of 56,000 units year on year.

                                           Market and operational outlook

The net financial position of manufacturing and sales companies amounted to €6,813 million at 31 December 2016, compared to €4,560 million at 31 December 2015. A dividend of €0.48 per share will be submitted for approval at the next Shareholders’ Meeting with an ex-dividend date considered to be on 15 May 2017, and the payment date on 17 May 2017.

In 2017, the Group anticipates a stable automotive market in Europe, Latin America and Russia, and growth of 5% in China.

The new objectives of the “Push to Pass” plan are to: deliver over 4.5 per cent Automotive recurring operating margin on average in 2016-2018, and target 6 per cent by 2021; deliver 10 per cent Group revenue growth by 2018 versus 2015, and target additional 15 per cent by 2021.