Aston Martin shares rise on 2023 profitability forecast

SUV Aston Martin DBX707

Courtesy: Sassy Films | Aston Martin

LONDON: British luxury car manufacturer Aston Martin Lagonda forecasts better returns this year, after extending its 2022 pre-tax losses due to a weakening UK currency.

The company more than doubled year-over-year pre-tax losses to £495m ($598m) in 2022, from £213.8m in 2021, and said profit was seen “significant” by a revaluation of part of debt denominated in US dollars, “such as the pound sterling [U.K. currency] weakened significantly against the US dollar during the year.

Adjusted operating loss also rose to £118m last year, from £74m in 2021. Revenue rose 26% on the year to £1.38bn, with gross profit up 31% YoY to £450.7m.

Despite acknowledging supply chain and logistics disruptions, which have been widespread in the auto industry, especially as a result of semiconductor shortages, the company said its wholesale volumes rose 4% year-on-year to 6,412. The figure included more than 3,200 vehicles from the Aston Martin DBX range, more than half of which were powered by the launch of the DX707 SUV model unveiled in February last year.

Aston Martin Lagona shares soared, up 14% as of 10am London time, after Aston Martin Lagona issued more optimistic guidance for this year.

“By 2023, we expect to deliver significant growth in profitability compared to 2022, primarily driven by increased volumes and higher gross margin in both basic and specialty vehicles,” it said Wednesday, pointing to a rebound in activity in the second half of 2023.

“In addition to the acceleration of the already sold DBS 770 Ultimate, we expect deliveries of the first of our next generation of sports cars to begin in the third quarter.”

The company expects wholesale volumes to increase to 7,000 units by 2023, anticipating its adjusted earnings before interest, taxes, depreciation and amortization to add approximately 20%.

He pointed to the continuing pressures of a volatile operating environment, high inflation rates and “pockets of supply chain disruptions.”

“Our order book has never been stronger,” Aston Martin Lagonda chief executive Lawrence Stroll told CNBC last month. “The future is fantastic, the cars are coming, the fundamentals of the business are extremely strong. And the demand has never been stronger.”

Aston Martin Lagonda's Lawrence Stroll: The order book has never been stronger

Stroll on Wednesday reiterated the company’s target to deliver 10,000 wholesale units in the next few years, as well as a goal to become “sustainable free cash flow positive from 2024”, after raising £654m of share capital in a move that also saw Saudi Arabia’s Public Investment Fund become an anchor shareholder.

“Over the past three years, I have consistently referred to our target of generating around £2bn of revenue and £500m of adjusted EBITDA by 2024/25,” Stroll said. “I am extremely proud that, given the strong progress we have made in transforming Aston Martin into a true ultra-luxury business, demonstrated by our ASP track record and gross margin, we are on track to meet these financial targets, but with significantly smaller volumes than originally anticipated.

“2022 in line with consensus is already positive news for AML,” Jeffrey’s analysts said in a note on Wednesday, noting the silver lining of the company’s guidance on units and EBITDA margin.

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