Stellantis (STLA.US) cuts full-year profit margin guidance, raises cash burn expectations, shares fall 12% premarket
1min read Stellantis (STLA.US) cut its annual profit forecast by a wide margin on Monday and said it would spend more cash than expected due to deteriorating industry trends, higher costs to reform its US business, and competition from Chinese electric vehicles. The company said it was lowering its expectations for positive free cash flow, now expecting to burn between 5 billion and 10 billion euros ($5.58 billion-$11.17 billion) this year, after cutting its operating margin guidance. Stellantis said it expects an adjusted operating margin of 5.5%-7.0% this year, mainly due to its decision to accelerate the normalization of inventory levels in the US. Shares of the company fell 11.96% before the market opened on Monday after the announcement.
Stellantis joined rivals BMW, Mercedes and Volkswagen in warning of lower-than-expected profits, after BMW and Volkswagen cut their annual forecasts a few days ago, and Volkswagen did so for a second time in three months. Aston Martin, the UK luxury carmaker, also issued a full-year profit warning on Monday, citing supply chain disruptions and weak demand.
The company, which owns brands including Chrysler and Citroen, is bringing forward its target to keep dealer inventories below 330,000 vehicles to the end of 2024. It will reduce shipments to North America in the second half of the year by more than 200,000 units, double its previous guidance. It will offer higher incentives for 2024 and older vehicles, and invest in productivity.
Stellantis said that weaker-than-expected sales in most regions in the second half of 2024 would also affect its operating margin. "The competitive environment is intensifying due to increased industry supply and increased competition from China," the company said.
Stellantis was sued by its US shareholders earlier this year, who accused the automaker of hiding rising inventory levels and other weaknesses before reporting disappointing earnings that caused its stock price to fall. The automaker also announced in August that it would lay off up to 2,450 factory workers at its plant outside Detroit due to the discontinuation of production of the Ram 1500 Classic truck.