Peugeot may have $2.8B loss on lower sales

PSA Peugeot Citroen, Europe's second-largest carmaker, said it may have an operating loss of as much as 2 billion euros ($2.8 billion) this year as sales decline and people buy smaller, less costly autos.

The extent of the loss will depend on the assistance the French government is able to offer the auto-industry and on the extent of support Peugeot provides to its own suppliers, the Paris-based company said in a statement today. The loss will be between 1 billion euros and 2 billion euros, the company said.

"Peugeot's expected loss is roughly in line with our estimates and worse than the market consensus," said Gianmarco Bonacina, an analyst at Equitasim in Milan with a "neutral" rating on the stock. Bonacina had predicted a 1.6 billion-euro loss and said the consensus was for a 1.3 billion-euro deficit.

European carmakers have suffered the worst sales slump in 15 years as the global recession deters people from making big- ticket purchases. Peugeot has received a 3 billion-euro loan from the French government and its sales have been bolstered by payments encouraging people to scrap old cars and buy new ones.

Peugeot, which said today it will sell about 500 million euros in convertible bonds and may increase that to 575 million euros, was trading up 2.8 percent at 19.83 euros as of 10:43 a.m. in Paris. The stock, which earlier fell 4.6 percent, has gained 63 percent this year, the best performance on the nine- member Bloomberg Europe Autos Index. That values the carmaker at 4.63 billion euros.

Credit Quality

Credit-default swaps on Peugeot widened to the highest since April 1, according to CMA DataVision prices at 8:55 a.m. in London. An increase signals deterioration in the perception of credit quality.