Peugeot SA share price up, raises 2014 full-year forecast as sales rise

PSA Peugeot Citroen said cash flow target is within reach two years earlier as strong demand in China contributed to a third-quarter increase of revenue.

CFO Jean-Baptiste de Chatillon stated in front of journalists that Peugeot will probably hit positive operational cash flow this year, rather than in 2016 as predicted. He also added that he would be “very disappointed” if the company doesnt reach the target.

The French vehicle manufacturer reported a first-half profit for the first time in three years and has now focused on shipping outside of Europe. In an effort to do this, Peugeot is expanding its partnership with Chinas Dongfeng Motor Corp., while cutting down its globally sold models to 26 by 2022 from 45 at the moment.

Peugeot projected market growth in Europe to be between 4% and 5% in 2014, an increase from its previous forecast of 3%. The region is key for the company as it accounts for more than 60% of its global sales.

Europes second-largest car maker reported a third-quarter shipments rise of 5.4% up to 643 600 vehicles, including a 44% increase in China and Southeast Asia and 7% in Europe, accompanied with declines in Russia and Latin America. Overall Q3 revenue edged up 1.6% up to €12.3 billion, defying analysts projections for a drop.

The Q3 sales increase was assisted by a 5.8% growth of the European vehicle market. Germany recovered 4.5%, Italy was up 5.3%, Spain gained 16.9% and the UK grew 7.6%. However, the French market didnt change.

Factory utilization rose 11% year-to-date by the end of Q3, up to 83% of capacity. Mr. de Chatillon said that the company is sticking to its plan to decrease inventory by €700 million by the end of this year. The four-year reduction program is aimed at €1 billion, as the company is lowering production costs with a focus on cutbacks in Russia and Latin America.

Peugeot said it expects Russian auto demand to fall 15% instead of the 10% it projected before. Sales in Latin America are also expected to drop 10%. However, the company predicted a 10% rise in China.

Peugeot SA climbed 2.07% on Tuesday and closed at €9.37. On Wednesday the stock gained 0.63% to trade at €9.43 at 8:24 GMT, marking a one-year increase of 8.81%. The company is valued at €7.34 billion. According to the Financial Times, The 23 analysts offering 12-month price targets for Peugeot SA have a median target of $11.00, with a high estimate of $17.00 and a low estimate of 46.62. The median estimate represents a 17.42% increase from the last price of $9.37.

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