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FutureStarrAston Martin 2022 Pretax Loss Widens
Aston Martin 2022 pretax loss increased due to a decline in the pound against dollar, making its debt more costly for the company. Furthermore, Aston Martin experienced weaker sales due to new supply chain challenges which prevented it from meeting its medium-term targets.
Chairman Lawrence Stroll remains confident in the company's ability to overcome recent setbacks. Last month, it announced a capital raising to address its debt issues. Furthermore, Mercedes-Benz is working with Stroll on developing an exclusive V8 engine.
The pound's decline against the dollar had an adverse effect on Aston Martin's financial results. They reported a wider pretax loss of 495.0 million pounds for 2022 compared to their loss of 213.8 million the year prior, due to a negative noncash forex revaluation of their U.S. debt that adversely impacted earnings and reduced cash balance by 156 million pounds.
The firm's DBX SUV model was particularly hard-hit by the weaker pound, while sales of its V12 Vantage sports car also suffered. As a result, luxury carmaker Bentley reduced its wholesale delivery volume outlook for 2022 from 6,600 to 6,200 vehicles.
According to British-based automotive analyst Charles Tennant, Ferrari's losses will continue to widen and the company requires a major restructuring in order to catch up with rivals. If sales cannot be revived quickly, additional cash could be needed and even an acquisition by Chinese conglomerate Geely is possible, Tennant suggests.
Chairman Lawrence Stroll has been striving to improve margins at Aston Martin, hiring former Ferrari chief executive Amedeo Felisa as CEO in May this year. Unfortunately, their latest pretax loss of PS226 million for quarter three is more than double their corresponding loss a year earlier and now projects an annual loss of PS511 million.
As a result, Aston Martin's share price has declined more than 60% this year. Stroll indicated that a capital raising plan will help alleviate its debt problems; however, the shares remain below their IPO price and thus shareholders continue to be diluted.
Aston Martin has been actively managing costs by partnering with Mercedes-Benz. This partnership will give them access to Mercedes' extensive technical know-how when creating electric vehicles.
But that is still some distance away, and Aston Martin may need to rely on its own earnings in the meantime. As a result, the company is burning through cash at an alarmingly fast pace.
Ian Fletcher of IHS believes Aston Martin's cash balance has dropped 60% to PS156 million, leaving them in an untenable situation if they wish to make electric cars. Although Aston Martin recently announced a strategy to become more like its rivals, Fletcher doubts they can successfully transition away from traditional vehicles into electric models.
Aston Martin Lagonda Global Holdings PLC (LSE:AML) experienced a pretax loss of nearly 50% in the first half of 2022 as the weaker pound against dollar increased costs on their operations. This loss before tax soared to PS511mln from PS189mln one year prior, reflecting an adverse revaluation of its US dollar debt.
The luxury car maker cut its full-year sales and profit guidance, while forecasting fewer vehicles this year than anticipated. It now expects to sell between 6,200-6,600 cars this year instead of the previously stated minimum target of 6,600. Moreover, EBITDA margin was reduced from 3.5%-4.5% in order to reflect increased margin expansion risks.
Supply chain and logistical issues have had an impact on Aston Martin's results, however the firm also faces higher costs due to additional expenses associated with managing the logistics of its new models as well as increased depreciation and amortisation.
Goldman Sachs analysts noted that Goldman's widening losses will affect its earnings per share and margin, but they anticipate a modest recovery for luxury carmaker in 2020-21. Its strong average selling prices and ASPs should help it offset any costs caused by supply chain disruptions.
However, the German bank noted that Aston Martin is still struggling to carve a place for itself in an industry with strong growth potential, leaving it susceptible to takeover attempts.
In September, Aston Martin raised cash through an investment by Chinese car manufacturer Geely and the sale of shares. While this helped reduce its debt load, it still faces significant obstacles.
Lawrence Stroll, the company's billionaire chief executive, remains optimistic about its medium-term prospects. Unfortunately, with a pretax loss of almost PS511mln in the first six months of this year and a negative revaluation of its dollar-denominated debt, Aston Martin appears to be facing an uncertain future.
Aston Martin has managed to raise $185 million of debt through an investment and share sale, but that doesn't change the underlying issues facing the company. Its valuation has already dropped below its IPO low, suggesting it may struggle in the long run without significant help from electric cars.
On Monday, Aston Martin reported an expanded pretax loss for 2022 due to a decline in the value of the pound that negatively impacted their dollar-denominated debt. The London-based maker of high-end sports cars lost PS285.4 million ($347 million) during the first half of 2022 versus a profit of PS90.7 million a year earlier, according to their most recent quarterly results.
Due to a global supply chain disruption and inflationary pressures, car sales declined and costs rose. Aston Martin stated it intended to cut its operating losses in 2022 and become free cash flow positive by the second half of 2023.
The company is striving to become more like its rival Ferrari. Chairman Lawrence Stroll has been working to increase margins and introduce more profitable models. A capital raising of $660 million in September - which included Saudi Arabia's Public Investment Fund - was part of a strategy to reduce debt and invest in new models.
On Monday, shares of Aston Martin fell as much as 3% in European trading before recovering somewhat. However, investors remain worried about the company's prospects due to an impending ban on high-polluting diesel and petrol cars from 2030 onwards.
Stroll has a plan to increase revenues and boost margins by offering more affordable vehicles, complementing his already extensive selection of luxury SUVs. He's even enlisted former Ferrari chief executive Amedeo Felisa as part of his team in this endeavor.
He hopes to sell more vehicles in the second half of 2022 as supply chain issues are cleared and production of higher-profit models such as luxury SUVs DBX707 and V12 Vantage sports car begins to ramp up. However, analysts note that carmakers face challenges from rising fuel costs which is driving demand for electric vehicles.
Analysts are also concerned about Aston's collaboration with struggling electric car battery startup Britishvolt. The firm is an integral partner in Aston's plan to construct a plant in northeastern England to manufacture batteries, yet has suffered due to Britain's cost-of-living crisis and high inflation rate.
Unfortunately, Aston Martin's stock could easily slip into a "cash burn" hole that could require further funding or even be taken over by Chinese auto giant Geely.
The British currency fell against the dollar, impacting Aston Martin 2022 shares. The luxury car maker posted a wider pretax loss of 495.0 million pounds for 2022 than expected at 213.8 million the prior year. Furthermore, Aston Martin booked an adverse non-cash forex revaluation on US dollar-denominated debt due to the weakening in sterling against other currencies.
Aston Martin also forecast fewer vehicle deliveries than anticipated this year. Originally, the company had hoped to sell over 6,600 cars this year; however, now estimates suggest sales may be closer to 6,200 units.
Furthermore, the company acknowledged that its supply chain has been affected by new issues, potentially leading to a decrease in wholesale volumes.
However, Aston Martin is turning towards a high-margin sport utility vehicle (SUV) to stay afloat. They plan to release the DBX707 model this year, which they hope will regain some of the market share that its standard DBX has lost over time.
This new model is likely to be a hit, and Aston Martin could potentially boost sales and profit margins in the long run. But reaching those targets will be difficult without collaboration with an industry giant like Mercedes.
The company is also striving towards electrification, with the goal of selling cars with low emissions. However, this goal will take years to achieve.
Another issue facing Aston Martin is its enormous debt burden. Its private equity owners have failed to provide the funds required for turnaround, and interest payments on outstanding debt have become a burden on the firm's profitability.
Due to this, Aston Martin's share price has plummeted since its IPO in 2018. It is now trading at a fraction of its former value and shareholders are seeing their stakes shrink.
Aston Martin is seeking to revive its fortunes by developing an array of electric cars. To do this, they have joined forces with Daimler's Mercedes-Benz to access their technology and engineering know-how.