PSA Peugeot Citroën

Rule number one when preparing excuses: pick a good one. The way PSA Peugeot Citroën tells it, the tsunami in Japan continues to wreak havoc on its automotive supply chains, forcing it into the full-year profit warning it issued on Wednesday, as it presented half-year results. If Nissan and Daimler had not reported their own figures at the same time, arguing that supply-chain disruption had been generally less than feared, shares in Peugeot might have avoided an 8 per cent drubbing, easily the worst among the CAC 40.

The market’s stern judgment says a lot about the challenges facing Peugeot chairman Philippe Varin, now two years into the job. For all the emphasis on “operating excellence” from the former Corus chief – his own carefully chosen metrics for capacity utilisation and procurement now look a lot smarter – the bottom line is that Russia, China and Latin America apart, the group is simply not shifting enough cars and vans.

A push into premium models is sensible, but takes time: high-end models like the 3008 crossover and the DS3 minicar accounted for 17 per cent of the group’s total sales in the first half, from 14 per cent last year. It also consumes a lot of cash: Peugeot expects no free cash flow for the full year. As usual, the really encouraging numbers are emerging from the periphery: Faurecia, the car-seats specialist, and the logistics division, Gefco, where recurring operating income was up by 57 per cent and 17 per cent, respectively. The finance arm continues to generate a return on assets twice that of the typical French bank.

Until Mr Varin finds ways to regenerate the core, though, Peugeot will continue to languish. Two years ago PSA was trading at just under half the average price/book valuation of the European auto sector; today it is two-fifths. Before long the excuses will start to dry up.