Aston Martin shares plummet following a profit warning tied to supply challenges and production cuts. Significant issues with supply chains have impacted the release of upgraded models. Production volume for 2024 has been revised downwards by 14%. The company aims to stabilize future production despite financial setbacks. Optimism remains for reaching 2025 financial targets.
Aston Martin’s shares experienced a dramatic 20% drop, reaching a two-year low of 127½p. This decline occurred after the company announced supply chain problems affecting the production of four recently upgraded models, resulting in missed yearly targets. In response to these challenges, Aston Martin decided to reduce its 2024 production volume to 6,000 cars, a 14% decrease from the previously anticipated 7,000 units.
The company highlights the persistent problem of supply chain disruptions, particularly affected by the insolvencies of key German suppliers, Recaro and Eissmann, which are crucial for providing seats and dashboards. CEO Hallmark, who recently joined from Bentley, emphasized the need for prompt adjustments in production plans due to these disruptions and the weakening economic climate in China.
Sales of the DBX 4×4, one of Aston Martin’s top-selling models, have also struggled in China, compounding the company’s difficulties. Despite these setbacks, Lawrence Stroll, chairman of Aston Martin, remains hopeful. Stroll continues to back the company’s long-term turnaround strategy, expecting to achieve targets of £2 billion in sales and £500 million in underlying operating profits by 2025.
Financial forecasts are bleak for 2024, with Goldman Sachs predicting a 5% fall in revenues to £1.54 billion and a 2% drop in EBITDA to £269 million. They also foresee a potential increase in bottom-line losses by 25%, nearing £300 million. Critics, such as Barclays analyst Henning Cosman, express disappointment regarding Aston Martin’s struggles to fulfill its 2024 ambitions.
The company’s third-quarter results will coincide with the UK government’s autumn budget announcement on October 30. Despite current challenges, improved performance is anticipated in 2025, as evidenced by Goldman Sachs’ forecasts of £2.07 billion in revenues and an EBITDA of £540 million, alongside a pre-tax profit of £20 million.
Aston Martin confronts immediate financial hurdles but maintains a strategic focus on long-term recovery goals.
