PSA Peugeot Citroen has announced it has no plans of selling new shares after recent report coming out in a French newspaper that the 2nd biggest automaker in the world was considering that option as the auto market of the region sank for the 2nd straight year. As stated by the spokesman, Jean-Baptiste Mounier, capital increase is not in the agenda of the company now.
La Tribune, the French newspaper reported that the carmaker is actively discussing an eventual share sale; however it didn’t mention exact source of this report. According to the newspaper report, the controlling Peugeot family has already discussed what percentage of dilution should be acceptable for the wellbeing of the company.
European auto market has already contracted to a figure that’s the lowest in last 20 years. In such a situation, Peugeot has already started to sell bonds, disposed of assets and cut production capacity in an attempt to restore profit. The manufacturer also stated that it is still committed to reduce cash consumption rate 50% in this year. The company aims to reach the break-even level within the next year as it had burnt through 3 billion Euros in 2012.
Analyst of the Commerzbank AG, Sascha Gommel stated that if the other auto makers are taken into consideration, only Fiat has a weaker balance sheet. Gommel has reduced recommendation on the shares of Peugeot. Since the start of 2013, share prices have already increased and hence, the rumors have found some sort of foundation.
Peugeot experienced a tumble of 5% and each share is currently priced at 6.99 Euros. On yesterday, the company had its stocks priced at the highest level since 22nd May and in the current year; it has gained 32%, thereby taking the company valuation to 2.56 billion Euros.
In 2012, Peugeot sold Citer vehicle-rental unit to Enterprise Holdings for a price of 440 million Euros. On the other hand, it sold 75% stake in the Gefco trucking operation to the OAO Russian Railways for a whopping price of 800 million Euros.
In last February, Peugeot sold a 1 billion Euro 5-year bond. Apart from that, the Banque PSA Finance car-loan unit of the company sold 1.2 billion Euros in 1-year debt in last March. The bond sale of banking division is guaranteed by the French state with temporary approval from the European Union regulators.