PSA Groupe earnings rose 13% in 2019 to 3.2 billion euros ($3.59 billion), leading the automaker to boost its dividend to 1.23 euros ($1.34) per share, but it warned that weaker sales in Europe this year and uncertainty surrounding the coronavirus could be challenges throughout 2020.
The results come against the backdrop of its pending merger with Fiat Chrysler Automobiles and signs that other automakers are experiencing weaker sales in key markets.
PSA shares rose 4.7% to 18.51 euros in Paris.
“Plants are running full speed, the order book is stellar,” CEO Carlos Tavares said in a press conference Wednesday. “We are facing this turmoil in a more robust” position than the company was in a few years ago.
Acquiring Opel and Vauxhall from General Motors led to savings in parts purchasing, and that helped boost PSA’s operating margin to 8.5% last year.
The company’s profitability also benefited from successful introductions of more expensive SUV and crossover models such as the Citroen C5 Aircross. PSA’s revenues rose 1% to 74.7 billion euros ($81.3 billion).
PSA forecasts an automotive operating margin of more than 4.5% through 2021, according to Chief Financial Officer Philippe de Rovira, who said that was a conservative target.
The improved operating income did not include about 1.5 billion euros ($1.63 billion) in restructuring charges, according to Bloomberg Intelligence auto analyst Michael Dean.
Tavares said he doesn’t expect major restructuring costs related to the FCA merger, which both companies expect to close next year. He also said he doesn’t expect any regulatory obstacles to the deal.
Acquiring FCA gives PSA an opportunity to reestablish itself in the North American market, especially through the pickup truck and SUV strength of the Ram and Jeep brands.
FCA would benefit from PSA’s expertise in low-emission powertrains and from PSA’s strength in European markets, especially France. Fiat has long been strong in Italy, its home market.
The transaction was announced in December and would create the fourth-largest global automaker.
Like PSA, Fiat also posted more upbeat results than most rivals this year.
PSA expects the European auto market to decline about 3% in 2020, slightly more than the 2% drop forecast by the European Automobile Manufacturers Association. That outlook was released before the spread of the coronavirus to Europe.
Tavares recognized the uncertainty the virus presents, both to consumers in the most affected countries and to supply chains.
PSA has closed factories in Wuhan, where the outbreak was first diagnosed, but expects to reopen them in the second week of March.
The company reported 700 million euros ($761 million) in losses and writedowns in China last year, where its sales have fallen sharply. PSA is ending a joint venture with China’s Chongqing Changan Automobile.
Tavares said PSA planned to introduce several new electric vehicles in China, but he did not offer details or a timetable.