Fitch upgrades Peugeot to BB-

Fitch Ratings said it upgraded Peugeot SA's long-term issuer default rating to BB- from B+ with a positive outlook and affirmed the senior unsecured rating at BB-.

Fitch said the upgrade reflects its projections that Peugeot’s core automotive operations will remain profitable following the improvement of their operating margin to around breakeven in 2014, before adjustments for capitalized development costs, from negative 2.9% in 2013 and negative 3.9% in 2012.

The agency also forecasts free cash flow margin to remain positive, between 1% and 3% through 2017. Fitch believes that the group continues to face challenges, including weak demand in several emerging markets but this should be offset by the gradual recovery in Europe.

Furthermore, PSA's significant work on its cost structure over the past couple of years has started to be successful and should mitigate the intense pricing pressure and continuous overcapacity in its domestic market, the agency said.

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