Aston Martin Lagonda Global Holdings PLC (LSE: AML) said it will deliver fewer vehicles than expected this year after being hit by further supply chain challenges, though it reported higher revenues in the third quarter due to price hikes.
The sportscar manufacturer’s loss before tax of £226mln was more than double that of a year ago, with a £511mln loss for the year to date, up from £189mln a year ago, reflecting a £245mln negative revaluation of US dollar-denominated debt.
Operating losses also increased, with £58.5mln in the quarter bringing the year-to-date total to £148mln, though this also included a sizeable non-cash item of a £71mln increase in depreciation and amortisation as the company accelerates amortisation of development costs of the launch of its next GT/sports vehicles in 2023.
Net debt increased 3% during the quarter to £833.4mln, including a cash balance of £772mln after the recent placing and rights issue, of which some was used for a US$200mln debt tender that was completed early in the fourth quarter.
Sales volumes in retail outpaced wholesales, though the latter was up 3% to 1,384 in the past quarter. Revenue increased by 33% in the quarter to £316mln and is up 16% in 2022 so far to £857mln thanks to the ‘core’ average selling price rising 28% in the quarter to £189,000.
Deliveries of 17 Valkyrie ‘hypercars’ in the quarter also helped revenues, with 44 vehicles delivered in the year to date.
Aston Martin executive chairman Lawrence Stroll said new supply chain challenges saw delays affect more than 400 vehicles that were expected to be delivered in the third quarter.
Supply chain and logistics disruptions delayed the timing of deliveries, which resulted in a working capital outflow of £106mln, which fed into a free cash outflow of £336mln.
But looking forward, the company said front-engine sports cars are now sold out into the second quarter of 2023 and there has been an acceleration in orders for its DBX707 sports utility.
Stroll said supply chain headwinds that “are already improving in Q4, have disrupted our near-term financial performance and modestly impacted our full year guidance, the medium and long-term outlook is robust”.
Wholesale guidance was snipped to 6,200-6,600 units from ‘at least 6,600 units’, while increased costs are leading to EBITDA margin being cut to 1%-3% of expansion from 3.5%-4.5%.
Aston Martin shares fell 15% to 90p in early trading on Wednesday.
Analyst Sophie Lund-Yates at Hargreaves Lansdown said following the supply chain disruption and logistic stalemates, “this is not the development the luxury carmaker needed, its valuation has already motored downwards since listing just a short time ago, with genuine questions being raised about the sustainability of the group’s long-term growth drivers.
“Volume downgrades should also come with a dose of healthy scepticism, with it being possible that weaker demand, not just supply issues, could be lurking beneath the surface."
Orwa Mohamad, analyst at Third Bridge, said the huge challenge for the company remains reducing its debt levels.
“This is particularly concerning in a deteriorating macro backdrop. It has struggled since leaving Ford’s control, with different owners having different objectives and no consistent strategy.
“Our experts say that the company has very limited room for a further price increase to pass on the inflation costs. However, there may be a chance of a 5-6% price increase for the launch of the facelift next year because it will bring more value to customers.”
He said the successful increases in average selling price were driven by reducing stock availability and thus reducing variable marketing expenses, with the next key to further increases depending on its ability to supply the DBX 707.
“The biggest driver for the ASPs over the next five years will be the launch of the mid-engine cars. Our experts say less competition and the lighter equipment levels mean a much higher margin.”
Although its brand remains strong, helped by the quality of the cars, the company is still chasing Porsche and Ferrari in terms of awareness and customer desirability, said Mohamad, while also lagging behind its peers in electrification.