Moody's Investors Service on Thursday has downgraded its ratings on French car maker Peugeot S.A. (PEUGF.PK) and its rated subsidiary GIE PSA Trésorerie by one notch to B1 from Ba3, thereby concluding the review initiated by Moody's on February 15, 2013. The outlook on the ratings is now stable.
Falk Frey, a Moody's Senior Vice President and lead analyst for PSA, stated: "We have downgraded PSA's rating in response to its worse-than-anticipated financial performance in FY2012, particularly due to greater-than-expected losses in its automobile division, negative free cash flow from industrial operations and ongoing challenges to restructure its automotive operations."
Frey added that unless Western European market demand recovers strongly in 2014 from expected 2013 levels, Peugeot may be forced to undertake further cost-saving measures beyond the announced restructuring plan to achieve its target of break-even operating cash flow by year-end 2014.
PSA's financial and operating results for fiscal 2012 were well below Moody's expectations. The B1 rating with stable outlook incorporate Moody's expectation that PSA's operating and financial performance would start improving gradually in late 2013, with the company reaching break-even in group operational free cash flow by the end of 2014.
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