International
Markets: French government and Dongfeng of China invest in listing PSA Peugeot Citroën
By Finfacts Team
Feb 19, 2014 - 11:42 AM

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France 24 reports that PSA Peugeot Citroën, which has been manufacturing cars in France for over 100 years, has agreed to a deal that will see both the French government and Chinese carmaker Dongfeng buy large stakes in the struggling company.

Peugeot announced on Wednesday that its board had approved the agreement, in which the French government and Dongfeng will each invest €800m ($1.1bn) in exchange for 14% stakes in the company.

The move marks a huge transition for the carmaker, which up until now, has been controlled by the Peugeot family. Under the agreement, the family’s 25% stake and 38% of voting rights will now be reduced to equal both the French government and Dongfeng’s stakes in the company.

The deal is crucial for Peugeot, which has struggled to stay afloat in recent years. Despite being France’s number one carmaker and the second largest in Europe, the company has been hit hard by poor sales, losing €5bn in 2012 and cutting thousands of jobs.

Dongfeng is based in the central Chinese city of Wuhan and is one of China’s biggest car producers but is largely unknown abroad.

PSA announced on Wednesday net losses in 2013 of €2.3bn compared with a €5.0bn  loss in 2012.

"Obviously Dongfeng has nothing to contribute but cash -- it has no technology, no brand, no overseas operating experiences," said John Zeng, Shanghai-based analyst with consultancy LMC Automotive, as reported by AFP.

"This deal is definitely crucial for  PSA Peugeot Citroën to sustain its current operation, but for Dongfeng, it could mean more risks than opportunities," he said.

One reason, he said, is the uncertain nature of technology transfers, while Dongfeng's stake in PSA is limited to 14 percent. That contrasts with compatriot Geely, which in 2010 bought Volvo Cars in its entirety.

Economic View: Housebuilding growing once again; Dermot O'Leary of Goodbody comments - - "It would be a very large understatement to say that the Irish housebuilding industry has had a tough time in recent years. Output in the sector fell from a peak of c.90,000 units to just 8,300 units last year. Indeed, there is reason to believe that this overstates the level of housebuilding in 2013, as completions are counted when an electricity connection is made and so actual construction may have occurred some time ago.

It appears though that this torrid time may be at an end, with recent house price rises incentivising a recommencement of building activity. The latest house completions data for January show an annual increase for the first time since 2006. Commencement data are an even better guide of building activity and have also been showing more positive signs of late. In the 12 months to December 2013, commencements grew by 17% yoy. Unsurprisingly, Dublin is leading the recovery in housebuilding, with commencements up by 67% in 2013. Cork (+21%) and Galway (+12%) also saw increases last year. One shouldn’t overstate the significance at this stage, given the very low base (4,710 commencements in total in 2013), but the improvement indicates better times for the housebuilding sector.

We have estimated that housing demand will grow to 26,000-36,000 over the 2021-2026 period, so there is clearly scope for significant growth in residential output over the coming years."

Independent News & Media: APN announces capital raise & FY13 results; Rachael Cairns of Goodbody comments - - "APN News & Media announced it is raising A$132m in equity from its shareholders. This is to help fund the acquisition of the remaining 50% of its radio businesses that it doesn’t own for A$246.5m. Independent News & Media has released a statement this morning to say that it will not be taking part in the APN capital raise and so its stake in the company will be reduced from 28.95% to 18.61%. The statement notes that INM’s priority objective is having operational flexibility to reposition itself for the evolving media market in Ireland. It notes that it remains fully supportive of the APN strategy and is fully committed to retaining its strategic stake in APN.

APN also reported its FY13 results. Group revenue came in at A$817.2m, -1% yoy. Group EBITDA was +8% yoy to A$162.8m. On current trading, management notes that it has been a challenging start to the year, with publishing revenue declines that have been consistent with H213 and radio/outdoor in line with 2013. Overall, costs are down yoy. As expected the group has not announced a dividend for 2013.
Overall, while this news is negative from the perspective that INM will see its stake reduced, we believe it is favourable that the company doesn’t partake in the raise given its own balance sheet still remains highly leveraged (we estimate c.2.7x net debt/EBITDA at end 2014)."

Conall Mac Coille, chief economist at Davy, comments - - "Stock indices fell slightly on Tuesday. The Euro Stoxx 50 was down 0.1% and the S&P 500 up 0.1%. Both the Empire State manufacturing survey and the German investor sentiment release disappointed expectations, hitting sentiment. The euro gained over half a cent against the dollar, and is now trading at $1.376.

At 1.9%, UK CPI inflation in January came in below the market consensus for a 2.0% rise. As set out in yesterday’s market comment, aggressive discounting by retailers in January, coupled with a fall in utility prices, suggested that CPI inflation would fall below 2%. The pound sterling lost over half a penny against the euro on the news, with the exchange rate rising from 81.6 pence, to 82.4 pence.

In the US, the key releases today are housing starts and building permits data for January. However, the data will surely be affected by the exceptionally poor weather conditions at the start of the year. Starts are expected to drop back from 999,000 in December to 950,000 in January. Overall, the sharp recovery in housing starts through 2012 and 2013, from a trough close to 500,000 in 2011, appears to have slowed sharply. That said, starts reached a new fresh high of 1.1m in November before falling back in December. So for now, the impact of the weather means it is very hard to see whether the US housing construction recovery has stalled."

US Markets

In New York Tuesday, the Dow fell 24 points or 0.15% to 16,130.

The S&P 500 rose 0.12% and the Nasdaq added 0.68%.

US benchmark updates

Asia Markets

The MSCI Asia Pacific Index was little changed Wednesday.

Japan's Nikkei 225 fell 0.52%; China's Shanghai Composite added 1.11%; South Korea's KOSPI dropped 0.20%; Australia's S&P/ASX 200 advanced 0.29% and in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index climbed 0.43%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600  is down 0.35% in mid-morning trade Wednesday.

In Dublin, the ISEQ  is off 0.19%

Ryanair is down 0.83%.

European Benchmarks

Irish Share Prices

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3747 and at £0.8246.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time high of 11,771 on May 21, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 3.11%, to 1,619 points, Bloomberg report.

On Tuesday in London the BDI closed up 16 points or 1.42% to 1,146.

The index rose by 220% in 2013 to 2,237.

Global rebalancing — the tanker scrapyard index?

Crude oil for March 2014 delivery is trading on the Chicago York Mercantile Exchange (CME/Nymex) at $102.58 up 15 cents from Tuesday's close. In London, Brent for April 2014 delivery is trading on the International Commodities Exchange at $110.10. The North Sea benchmark accounts for two-thirds of the global market.

Finfacts, July, 15, 2013: US West Texas Intermediate oil benchmark jumps in July - - margin between WTI and Brent falls.

Gold spot price

The spot price of an oz of gold is trading on the CME in Chicago at $1,320.00 down $4.7 from Monday's closing - - the gold price fell 28% in 2013, the biggest annual plunge since 1981.

Gold had hit a record high of $1,921.15 a troy ounce on Sept 06, 2011.

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