By RTT News,
December 12, 2013, 05:17:00 AM EDT
(RTTNews.com) - French carmaker PSA Peugeot CitroÃ«n (PEUGF.PK) Thursday announced that the Group's financial statements for the year 2013 will include an impairment charge on Automotive Division assets of about 1.1 billion euros, that will reduce consolidated result by the same amount, but will not involve any cash-out. Peugeot also confirmed its talks on the deal with Chinese automaker Dongfeng Motor Corp., its historical partner in China.
According to the firm, the impairment charge on Automotive Division assets reflect the impact of worsening automobile markets and unfavourable exchange rates in Russia and Latin America. Peugeot shares are currently down about 9 percent in Paris.
The changes in exchange rates are expected to have a material impact on Automotive Division recurring operating income and on Group operating free cash flow, excluding restructuring costs and non-recurring items.
Also, a 1 percent change in the euro against the Group's other currencies, including the real, the Argentine peso and the rouble, will have an impact of around 80 million euros on Automotive Division recurring operating income based on current market conditions.
The Group confirmed its objective of reducing operational free cash flow consumption at least by half in 2013. It is also maintaining its objectives for 2014 and to this end is stepping up its action plans to offset the negative impact of exchange rates on operating free cash flow.
Separately, the Paris-based automaker confirmed that it is reviewing potential industrial and commercial development projects with various partners, including Dong Feng Motor, and a potential capital increase.
However, the company said the discussions are at a preliminary stage and no assurance can be given regarding their outcome, and will keep the market informed in due course.
PSA Peugeot Citroen and General Motors Co. ( GM ) today announced further steps in their strategic Alliance, which remains structured around the main pillars of joint programs, purchasing, and logistics, focused on Europe and will be extended into cross manufacturing.
In September, French business daily Les Echos had reported that Peugeot was mulling a stake sale to Chinese automaker Dongfeng Motor Corp., its historical partner in China, as part of a strategic partnership to boost sales outside Europe, due to a fall in sales and market share in the region. A capital infusion was expected to help Peugeot to continue its developments in China and Southeast Asia.
Peugeot reportedly said that General Motors is its best bet to solve issues in Europe, while Dongfeng is the only solution for international expansion. However, General Motors has a clause in its agreement with Peugeot that it can abandon the deal if another partner takes more than 10 percent stake in Peugeot.
In mid-October, Peugeot had said it was examining industrial and commercial developments with different partners, comprising the financial implications that would result from them. The board was reportedly considering a potential capital injection from Dongfeng Motor.
In Paris, Peugeot shares are currently trading at 10.50 euros, down 8.7 percent, on a volume of 5.63 million shares.
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