Aston Martin Lagonda’s new chief executive has forced the luxury carmaker to cancel its financial plans and reduce production for the year. Shares in the company have plummeted since the arrival of the new executive.
The stock fell to a new low of 127 1/2p after Adrian Hallmark, a new Aston boss who was recruited from Bentley, admitted that the Warwickshire based company will miss their 2024 targets due to the inability of the supply chain to deliver parts for four models which have been upgraded during the last year. This is despite the fact that the business has missed its 2024 target by 20 per cent or 32p.
The company said that it would now produce 6,000 cars per year, which is 1,000 less than it had previously planned, a reduction of 14%. The company said this would “smooth out the cadence” in the future quarters.
The company also admitted that, contrary to its previous promises, it would not have a positive cash flow in the second half 2024.
Aston Martin told investors in a letter that production reductions were ordered “to address disruptions in its supply chain, and the continued macroeconomic weakness of China”.
The company explained that “concurrent with the significant increase in production for second half of year following the introduction of new models, the company is experiencing an increasing number of late component deliveries due to disruptions at several of their suppliers.” This is causing an increase in the number of vehicles to take longer to finish, affecting the efficiency of the company’s operations and delaying delivery.
The company had forecast that the volume would reach 10,000 by 2024.It has modified its promise that annual revenues will “substantially be” around £2 billion with underlying operating profit of £500 millions.Goldman Sachs, Aston Martin’s stockbroker, predicts that revenues in 2024 will be 5 percent lower than they were last year, at £1.54billion.
The underlying operating profit or ebitda – earnings before interest tax, depreciation, and amortisation – will also be lower than in 2023. It is expected to fall by nearly 2 percent at £269 millions.Goldmans anticipates a 25 percent increase in the bottom-line losses, to just under £300 million.
Henning Cosman is an analyst with Aston’s joint brokerage Barclays. He has warned for years that the expected hockey stick rise in profitability of the company was based on heroic assumption. Cosman wrote in a Monday note that the plan had “proved to much” and the profit warnings were “disappointing.”
Aston Martin is believed to have been hit particularly hard by the insolvency of German dashboard and car seat suppliers Recaro and Eissmann. The group’s best-selling Aston Martin DBX 4×4 has struggled to sell in China.
Lawrence Stroll, 65-year-old billionaire Formula 1 fan and Aston Martin Lagonda Chairman since he saved the company five years ago, remains optimistic about the prospects of the company. He said that his turnaround required “a long term view of the commitment necessary” and added: “I remain firm in this view.”
Hallmark, who is 62 and has been the Aston CEO for five years in a row, but only a month in, was more optimistic. “Near-perfect execution was needed to meet the ambitious 2024 plan of the company. We have to act decisively to adjust production volumes in 2024 due to the combination of disruptions from suppliers [and] a weak macroeconomic climate in China.
The company stated that it is confident in its ability to reach the target of £2 billion in sales and £500 millions Ebitda by 2025. Goldman predicts a £2,07 billion result and £540 millions. It forecasts a pre-tax profit in 2025 of £20million.Aston Martin chose the morning of October 30, the day before the budget, to release its third-quarter financial results.
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