PSA Peugeot Citroen, France’s biggest carmaker, forecast a tough second quarter, saying demand continued to sag in its domestic and core southern European markets, sending first-quarter sales down 7 per cent.
Revenue fell to 14.3 billion euros ($18.9 billion), compared with a forecast for 13.9 billion in a Thomson Reuters poll. Sales in its automotive division fell 14 per cent to 9.72 billion euros.
“The competitive environment remained difficult during the quarter, with pricing pressure similar to the last quarter of 2011 and markets in southern Europe worsened considerably, with an unfavourable impact on the group’s country mix,” PSA said.
“This environment should last throughout the first half of the year.”
Peugeot is trying to reduce its dependence on Europe, which it sees remaining sluggish, through a push into China and an alliance with US automaker General Motors designed eventually to cut $2 billion of the carmakers’ annual costs.
Along with Italian peer Fiat, Peugeot was among the biggest casualties of Europe’s shrinking car market in the quarter, when its deliveries plunged 17 per cent, outpacing the region’s 7.3 per cent contraction, according to data from the Association of European Automakers (ACEA).
All major car makers except Volkswagen lost money in Europe last year. In the US, by contrast, where Peugeot does not sell cars, first quarter sales surged a four-year high, while Asian markets like India and China have also seen growth rates picking up.
Peugeot repeated on Wednesday that it expected the auto market to shrink 5 per cent this year in Europe and 10 per cent in France, giving no earnings guidance for 2012.
The car maker, Europe’s No.2 after Volkswagen, did say it achieved nearly half of its 1.5 billion euros asset disposal plan in the first quarter and that net debt should decline significantly this year despite negative operational free cash flow before one-time items.
“PSA sales are not worse than expected, but there are still a lot of uncertainties ahead,” Barclays Capital analyst Kristina Church said. “They said the free cash flow figure is going to be bad, but how bad is the question.”