PSA’s Push to Pass strategy helps drive profitability

Less than a year after the PSA Group unveiled its ‘Push to Pass’ plan on April 5, 2016, the French automobile major has announced  growth in operating margin (+6%), vehicle sales (+5.8%) and net financial position (€2.7 billion Free Cash Flow).

Last year, PSA boss Carlo Tavares, having already achieved all of the goals he set when he joined the firm in 2014, revealed new objectives including a 10% revenue growth in 2018 versus 2015 and target an additional 15% by 2021. To achieve these targets, the company said it is adapting its business model, creating more value by optimising its customer base, while also expanding it through digitalisation and multi-brand offers in aftersales, leasing, used cars, mobility services and fleet management. Push to Pass is the first step toward achieving the group’s vision to be “a great global carmaker with cutting edge efficiency and the preferred mobility provider worldwide for lifetime customer relationship".

In 2016, Group revenues were €54,030 million (+2.1% YoY) compared to €54,676 million in 2015; automotive revenues were €37,066 million (+2.7% YoY), compared to €37,514 million in 2015, driven mainly by the success of recently launched models and the Group’s pricing power strategy. Net of adverse change in exchange rates, both Group and Automotive revenues were down 1.2%.

The Group recurring operating income was €3,235 million (up 18% YoY). The Automotive recurring operating income was €2,225 million (up 19%). In an environment characterised by adverse exchange rates, this growth was driven by higher volumes, positive price and mix effects, and lower fixed and production costs, says PSA.

Net income reached €2,149 million, an increase of €947 million compared to 2015. Net income, Group share, reached €1,730 million compared to €899 million in 2015.

While Banque PSA Finance reported recurring operating income of €571 million (up 11%),

Faurecia’s recurring operating income was €970 million (up 17%). The free cash flow of manufacturing and sales companies was €2,698 million.

Total inventory, including independent dealers, stood at 406,000 vehicles at 31 December 2016, an increase of 56,000 units year on year. The net financial position of manufacturing and sales companies was €6,813 million at 31 December 2016, compared to €4,560 million at 31 December 2015.

Commenting on the results, Carlos Tavares, chairman of PSA Group Managing Board, said: “These results demonstrate our ability to consistently deliver an excellent performance in an adverse environment. They are the outcome of the Group’s operating efficiency improvement and our competitive teams’ focus on the execution of the Push to Pass plan. Day after day, the Group is building the conditions for profitable and sustainable growth, reinforced by the success of the first launches in its product offensive.”

2017 market outlook
In 2017, the PSA Group expects a stable automotive market in Europe, Latin America and Russia, and growth of 5% in China. The new objectives of the Push to Pass plan are to deliver over 4.5% automotive recurring operating margin on average in 2016-2018, and target 6% by 2021; and deliver 10% Group revenue growth by 2018 vs 2015, and target additional 15% by 2021.