Stellantis NV posted better-than-expected earnings in the first half of the year as supply-chain and logistics snarls eased and cost-cutting measures helped lift profit.
(Bloomberg) — Stellantis NV posted better-than-expected earnings in the first half of the year as supply-chain and logistics snarls eased and cost-cutting measures helped lift profit.
The maker of Jeep SUVs and Peugeot cars reported an adjusted operating income margin of 14.4%, it said Wednesday, beating the 12.2% predicted by analysts. A key driver of the result has been cost cuts at Stellantis plants, and Chief Executive Officer Carlos Tavares said he plans to engage “more intensively” with suppliers for further reductions.
Stellantis shares rose as much as 1.8% in early trading in Italy. They are up roughly 27% so far this year.
The company has been able to work down backlogs of orders as shortages of critical semiconductors have let up and some logistics problems mostly resolved after having left thousands of cars stranded in European parking lots.
“We still have a couple of things that we are going to solve during the month of August, namely getting rid of our backlog in some of our yards where our customers are still waiting” for some cars, Tavares said on a media call.
What Bloomberg Intelligence Says:
Stellantis’ strong operating margin beat at 14.4% in 1H (vs. consensus 12.2%) was largely driven by strong pricing embedded in the order backlog, most notably in Europe, that may lead to consensus 15% profit upgrades. Industrial free cash was strong at €8.7 billion. Rising inventories is a modest concern and Stellantis will need to reassure that strong pricing levels can be maintained amid a more difficult 2H economic outlook. Vague 2023 guidance was confirmed.
Stellantis Beats Margin Yet Must Reassure on 2H Pricing: React
Michael Dean, BI autos analyst
Stellantis confirmed its full-year outlook for a double-digit margin, positive cash flows and the pace of its share buyback program. The carmaker said it sees demand this year across Europe, the Middle East and Africa to be stronger than previously expected. Adjusted operating income for the first half of 2023 reached €14.1 billion ($15.6 billion).
Tavares has said the manufacturer may need to further adapt its industrial footprint in the US, its biggest profit pool, and Europe as a consequence of the expensive shift to EVs. Stellantis, which is plowing €30 billion into EVs and software, is under pressure from the French and Italian governments to produce cheaper cars locally to maintain jobs in those markets.
Stellantis has no intention of slashing car prices amid aggressive price cuts from US rival Tesla Inc. and increased competition from lower-priced Chinese EVs, Taveres said. The company will continue cutting costs to make sure it can protect margins while offering more affordable EVs, he added.
(Updates with CEO comments beginning in second paragraph.)
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