Carmakers, suppliers hit by big declines in shareholder value
Any hope that this year's robust first-quarter recovery in shareholder value for Europe's automakers and parts suppliers would be extended evaporated in the second quarter. Automakers saw their average value, as measured by the Automotive News Europe/PricewaterhouseCoopers Transaction Services Shareholder Value Index, fall 12.0 percent. This followed an exceptional 27.3 percent gain in Q1.
Partsmakers experienced a similar decline, relinquishing 7.7 percent of their value in Q2 following a 31.1 percent increase in the preceding three months.
Auto retailers, however, fared slightly better, extending their Q1 gain of 35.3 percent by a further 3.7 percent in Q2.
Over the same period, stock markets demonstrated a far less volatile trend. The main U.S. and European markets achieved good growth in the six months to the end of Q1 this year. In Q2, however, the Dow Jones rose by 2.8 percent, Standard & Poor's by 2.5 percent and the UK's FTSE 100 by just 1.0 percent. Against this, over the same period Germany's DAX fell by 7.6 percent, the Euro STOXX by 6.2 percent and France's CAC by 3.6 percent.
Commenting on the Q2 outcome for the sector, Jason Wakelam, leader of PwC UK's Automotive Transaction Services, said: "Ongoing economic uncertainty continues to impact markets. The worst affected are those auto and partsmakers whose sales are concentrated in the euro zone. Those looking to the emerging economies of China and India have fared better and, perhaps surprisingly, UK retail sales have boosted the performance of the larger UK dealership groups."
VW only automaker to stay in positive territory
With a gain of just 0.9 percent, Volkswagen AG was the only automaker not to experience a decline in shareholder value in Q2. Despite the continuing difficult sales situation for automakers throughout western Europe, VW has continued to extend recent gains. Unit sales of the VW brand held up in its key German market, more than offsetting falls elsewhere in Europe. Sales grew strongly, too, in China, now the brand's largest market, as well as the United States, Russia and South America.
Other European automakers saw declines in the Automotive News Europe/PricewaterhouseCoopers Transaction Services Shareholder Value Index ranging from 9.8 percent for German sports car maker Porsche Automobil Holding SE to 35.8 percent for PSA/Peugeot-Citroen SA. The French carmaker remains troubled by its high level of exposure to the struggling euro-zone markets, including France, Spain and Italy, and by market concerns around delays in removing overcapacity because of domestic political considerations.
Significant declines in value were also recorded by Renault and Daimler, which had both been at the top of the list in Q1. Renault relinquished 17.5 percent in shareholder value as its worldwide unit sales dropped 3.3 percent in the first six months of the year. The company hopes to regain market share in France in the second half with the launch of new models such as the fourth-generation Clio but has scrapped its 2012 global sales targets.
Despite beating Q1 profit forecasts, Daimler's value to shareholders fell 18.2 percent in Q2, affected by the outlook in two large export markets, the United States and China. Unlike other luxury marques, such as VW's Audi and BMW, Daimler's Mercedes-Benz and Smart brands are failing to maintain momentum in the increasingly important Chinese market. Daimler's value was also affected by subsequently denied speculation that Aabar Investments, the Abu Dhabi sovereign wealth fund, may be considering selling its stake in the German company.
Also in the automaker category, Fiat's shareholder value fell by 10.0 percent and BMW's by 12.5 percent.
Said Jason Wakelam, leader of PwC UK's Automotive Transaction Services: "Q2 has not been kind to the auto makers. The state of the economy in Europe clearly doesn't help. Economic considerations are not helping, but relative performance is also being driven by overcapacity in Europe and m&a rumors."
Miba, Michelin rise during brutal quarter for suppliers
Closely reflecting the fortunes of automakers, the European parts sector experienced a reversal of fortunes in the second quarter compared with the first three months.
Just two partsmakers avoided a decline: Austrian sintered components manufacturer Miba AG, up 3.8 percent, and the world's second-largest tire manufacturer, Michelin, up 0.7 percent.
Elsewhere falls in the Automotive News Europe/PricewaterhouseCoopers Transaction Services Shareholder Value Index, declines ranged from 4.3 percent for Italian filtration and suspension systems specialist Sogefi to 33.8 percent for French exhaust, seating and interiors maker Faurecia. The latter achieved strong revenues in Q1 but remains exposed to the problems being experienced by its main customers in its home market. It was also affected by investor concerns about the levels of interest it has to pay on recent bond issues.
"What happens to the automakers has a knock-on effect on suppliers. However, you can't help but think the magnitude of short-term swings reflect over-reaction to the news," said Jason Wakelam, leader of PwC UK's Automotive Transaction Services.
It is noteworthy that many of those companies losing the most value in percentage terms in Q2 had achieved the greatest gains in Q1, suggesting a rebalancing by investors possibly occurred between the two quarters. Norwegian driver controls and cable specialist Kongsberg Auto, for example, saw a 45.5 percent gain in Q1 followed by a 23.6 percent fall in Q2 in reaction to a decline in Q1 profitability.
It was a similar story for Q1 table-topper Leoni AG, the German-based wiring specialist. It had gained 52.9 percent in Q1 but relinquished 19.3 percent in Q2. Leoni received the PwC 2012 European Automotive Shareholder Value award in June for its performance over the 12 months from April 2011 through March 2012. Over this period its total shareholder return grew 30.9 percent, against the sector average of 4.5 percent.
The winner over 36 months, French front-end maker Plastic Omnium, lost 6.1 percent in Q2 following a gain of 41.4 percent in Q1.
Led by Pendragon, retailers escape the worst
The worst performer in the retail sector in Q3 and Q4 2011, UK dealer giant Pendragon overcame its 2011 rights issue woes to take first place in Q1 this year with a gain of 77.6 percent in shareholder value, as measured by the Automotive News Europe/PricewaterhouseCoopers Transaction Services Shareholder Value Index. It has followed that with another top finish in Q2, gaining 9.1 percent.
Its performance has been buoyed by strong UK new-car sales with a 15.7 percent rise in unit sales through its 300 outlets reported for the first three months of the year.
Lookers, the star performer for its one-year growth of 28.2 percent at the recent PwC European Automotive Shareholder Value awards, took second place for Q2 with a 2.6 percent gain. Last May, the company reported it was continuing to produce strong financial results and expected they would be in line with management expectations or the half year to end of June 2012. New-car retail sales increased by 6 percent over the period January to May this year.
"Despite the grim picture across Europe, UK retail volumes were encouraging," said Jason Wakelam, leader of PwC UK's Automotive Transaction Services. "This has positively impacted shareholder value for the main UK dealerships, although there is a way to go before volumes return to pre-recession levels."
The weakest performance in Q2 came from Sweden's largest dealer group, Bilia AB. It followed a 36.8 percent rise in Q1 with a 22.0 percent fall in Q2. This came after the release of first-quarter results showing a fall in profits due to weak demand for new cars in Scandinavia and lower service revenues resulting from the mild winter.