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Growth Strategy
Corporate
Governance
Business Review
Corporate Policies
Management’s
Discussion
and Analysis
Statistics
including undrawn facilities, the Group
imposes strict limits on clauses in loan
agreements allowing lenders to require
payments to be rescheduled or to modify
the financial terms of the agreement.
None of its loan agreements contain any
rating triggers and the only agreements
containing material adverse change
clauses are with certain supranational
lenders that insist on this type of
protection. Currently, only five loan
agreements covering €300 million worth
of financing include material adverse
change clauses. Similarly, none of the loan
agreements contain any financial
covenants whereby the loans would
become immediately repayable if certain
financial ratios were not met. Presently,
none of the clauses would restrict the
availability of undrawn financing. In the
case of Banque PSA Finance and Faurecia,
additional safeguards are provided by the
absence of any cross-default clauses,
between the companies in these divisions
and the other divisions of the PSA Peugeot
Citroën Group.
2. RATING
Peugeot S.A. and Banque PSA Finance
have obtained ratings from Standard &
Poor’s and Moody’s Investor Service for
their short- and long-term debt issuance
programs and the debt issuance programs
of subsidiaries backed by Peugeot S.A. or
Banque PSA Finance guarantees.
On June 25, 2002, Standard & Poor’s
confirmed the A- long-term rating and A2
short-term rating attributed to debt issues
by Peugeot S.A., Banque PSA Finance
and their subsidiaries. Standard & Poor’s also
changed the outlook from stable to positive.
The agency stated that assuming the
Group’s operating margin remains above
5% of sales and the net cash reserves of the
manufacturing and sales companies increase
to more than €1 billion, it may decide to
upgrade the ratings in the future, provided
that Banque PSA Finance’s capital adequacy
ratio remains satisfactory.
On May 28, 2002, Moody’s Investor
Service upgraded Banque PSA Finance’s
long-term rating from A3 to A2 and its
short-term rating from P2 to P1. On
November 15, 2002, Moody’s Investor
Service confirmed the A3 long-term
rating and P2 short-term rating
attributed to Peugeot S.A. and to its
subsidiaries for debt issues guaranteed
by Peugeot S.A. It also changed the
outlook from stable to positive.
3. ANALYSIS OF CASH FLOWS
Net cash provided by operations of the
manufacturing and sales companies
totaled €4,389 million in 2002. Capital
expenditure for the year by these
companies, net of the proceeds from asset
disposals, represented a net cash outflow
of €2,618 million. These expenditures to
support the development of their businesses
and modernize their plant and equipment,
were entirely financed by cash flow from
operations, leaving free cash flow of
€1,771 million. Free cash flow was more
than enough to finance the €337 million
worth of dividends paid by Peugeot S.A.
and Faurecia, as well as the Group’s €517
million share buyback program and other
cash outflows from financing activities,
leading to a very significant improvement
in the manufacturing and sales companies’
net financial position. As of December 31,
2002, these companies had positive net
cash and cash equivalents of €594 million
as opposed to a negative balance of
€511 million at the previous year-end.
3.1. Cash flows from operating activities
– manufacturing and sales companies
Net cash provided by operations of the
manufacturing and sales companies came
to €4,389 million in 2002 versus €3,018
million in 2001 and €2,983 million in 2000.
PSA PEUGEOT CITROËN - MANAGING BOARD REPORT 109