Stellantis increases profit forecasts in ‘blowout’ debut earnings
Higher demand and chip shortages drive up car prices for newly merged auto group
Stellantis has joined a spate of carmakers that have increased their full-year profit forecasts, as higher customer demand and chip shortages drive up the price of cars.
The Dutch-headquartered carmaker posted what one analyst called a “blowout” first-half earnings debut on Tuesday, with an 11.4 per cent adjusted operating income margin.
It raised its full-year margin guidance to about 10 per cent, from 5.5 to 7.5 per cent. Analysts had forecast an 8 per cent margin in the first half of the year.
The results prompted a 4 per cent increase in the company’s share price to €17.09 by early afternoon on Tuesday.
Thomas Besson, an analyst at Kepler Cheuvreux, described Stellantis’s results as a “blowout”, but cautioned that carmakers’ margins were “not sustainable at this level”. He added that investors were aware “pricing is very, very high and at some point it is going to erode”.
Peugeot and Vauxhall owner PSA and Fiat Chrysler merged to form Stellantis in a $50bn tie-up late last year, creating the fourth-largest carmaker in the world and overtaking General Motors and Hyundai-Kia. The merger was completed in mid-January.
Stellantis’s results follow the trend of a return to high margins in the automotive sector, partly because of inflation in vehicle prices.
The continuing dearth of semiconductors has limited supply and forced manufacturers to be more selective about which cars they build, often driving them to prioritise more profitable models.
Prices have also been bolstered by the rising share of sales for electric vehicles, which enjoy strong government subsidies in many large markets.
Ford, Volkswagen and Nissan all posted stronger than expected results last week and increased their full-year forecasts.
VW chair Herbert Diess told the Financial Times last week that “the semis shortage probably has helped the entire industry to improve profitability”, referring to the prioritisation of the production of higher-end models.
Stellantis’s pro forma group revenues stood at €75.3bn in the first half of 2021, above consensus estimates of €73.1bn, while pro forma net profit stood at €5.9bn.
The chip shortage has, however, had significant downsides, holding back revenues and earnings for auto suppliers. It has also made investors wary of a drop-off in profitability when the shortage eases and car production increases again.
Stellantis said on Tuesday that it forecast no improvement in the supply of chips before the fourth quarter and estimated that the group’s production would decrease by 1.4m cars.
Separately, Germany’s BMW reported on Tuesday earnings before interest and tax of more than €5bn for the second quarter, compared with a loss in the same period last year, which beat analysts’ expectations. The carmaker said its results were boosted more by strategic “inventory management” of semiconductors than the prioritisation of certain models.
However, its chief financial officer Nicolas Peter warned that the chip shortages would “continue in the second half of the year” and have a “corresponding impact on sales volumes”.