Peugeot, Europe's second-largest carmaker after Germany's Volkswagen AG, said it will sell property assets along with a stake in logistics arm Gefco, after reporting a 48% drop in group net profit to €588 million in 2011.

"Deterioration in our business environment from the end of the first half led to very disappointing results from our automotive division," Peugeot chairman Philippe Varin said in a statement while insisting that the company's overall financial position "remains robust and secured."

Speaking to journalists in Paris, Varin warned that the European car market may contract 5% this year in the industry's fifth consecutive annual slump.

Peugeot, which sells most of its cars in Europe, posted a €92 million loss for its automotive division in 2011 compared with a €621 million profit in 2010.

The lower-than-expected results prompted a selloff in Peugeot shares and a ratings downgrade warning from Moody's Investors Service.

The stock shed nearly 7% on the Euronext Paris exchange to €14.06, for a total market capitalization of about €3.29 billion. Shares have lost more than 51% of their value in the past year, compared with a 17% fall in the benchmark CAC 40 index over the same period.

CM-CIC Securities analyst Florent Couvreur predicted that Peugeot's cash management plan should allow the group to slash its debt by about €1.1 billion this year, bringing it below €2 billion. "This should allow the market's fears to ease," he wrote in a note, adding that the group still has "considerable" financial strength. The analyst left his buy recommendation on the stock unchanged.

In Wednesday's warning, Moody's put Peugeot's Baa3 long-term and Prime 3 short-term debt ratings under review for a possible downgrade, amid expectations of "considerable challenges" in several European markets including France, Spain and Italy.

At a press conference, Varin said the divestment of nonstrategic assets will allow the carmaker to concentrate on increasing its sales outside Europe.

The planned disposals include the sale, completed earlier this month, of rental car business Citer SA to St. Louis-based Enterprise Holdings Inc. for an undisclosed amount.

Peugeot also aims to sell a stake in Gefco while remaining a "long-term strategic partner," CFO Jean-Baptiste de Chatillon told journalists on a conference call. The company hinted that it may float Gefco on the Paris market this year, according to press reports. Gefco's recurring operating income rose 12.6% to €223 million in 2011.

In addition to the asset disposals, Peugeot also said it plans to cut €1 billion in costs, more than the €800 million announced in October. The company's net debt more than doubled to €3.4 billion at the end of last year from €1.6 billion as of June 30.