PSA Peugeot Citroën slashed the book value of its plants and other automotive assets by 28 per cent, in a writedown adding €4.13-billion ($5.53-billion U.S.) to its 2012 net loss to reflect Europe’s worsening market outlook.
The struggling French car maker, due to report full-year earnings on Feb. 13, said on Thursday the impairment charge was prompted by new accounting guidelines as well as diminishing hopes for a European auto recovery.
“There was a realization in the second half that the crisis was going to be longer than expected,” chief financial officer Jean-Baptiste de Chatillon told reporters at a briefing in Paris.
The writedown, which also trims €243-million from Peugeot’s second-half operating profit, is “completely reversible” when market conditions improve, Mr. Chatillon said.
“This is purely an accounting adjustment which has nothing to do with operations.”
But the writedown to Peugeot’s automotive assets, which stood at €14.6-billion on June 30, comes on top of operational headaches at Europe’s second-biggest auto maker.
Peugeot, one of the companies worst hit by the region’s protracted car sales slump, is cutting 8,000 jobs and closing a factory to stem losses approaching €200-million a month. The company has pledged to return to break-even late in 2014.
Prior to Thursday’s announcement, analysts were forecasting a €1.52-billion loss for 2012, according to Thomson Reuters I/B/E/S.
Peugeot was removed from France’s benchmark CAC 40 stock index last year as its market capitalization shrank.
In guidelines issued on Nov. 16, France’s AMF market regulator urged companies to set more realistic asset valuations in light of expected cash flows.
The move has prompted a number of writedowns including charges totalling €7.4-billion at French bank Crédit Agricole SA over the past three months.
Peugeot’s writedown includes a €3-billion euro impairment charge to auto-division assets and €879-million to the value of deferred taxes.
The Paris-based company said the writedown did not affect its plans to reduce cash burn by half this year or its earlier €3-billion euro net debt forecast for the end of 2012.