Salem Radio Network News Tuesday, September 21, 2021

Business

Stellantis ups 2021 profit margin goal but chip squeeze weighs

By Giulio Piovaccari and Gilles Guillaume

MILAN (Reuters) -Carmaker Stellantis said on Tuesday it was raising its full-year target on its adjusted operating profit margin after strong first-half financial results, which included record margins in North America.

Stellantis, formed in January by the merger of Italian-American group Fiat Chrysler and France’s PSA, is now guiding for an adjusted operating profit margin of around 10%, which compares with a previous forecast of between 5.5%-7.5%.

Milan-listed shares in the world’s fourth largest carmaker rose as much as 4.1% at opening. By 0710 they were up 3.6%.

The forecast relies on the assumption of no further deterioration in the global semiconductor shortage which had been affecting the whole industry, and of no further lockdowns in Europe and in the United States due to the COVID-19 pandemic.

Last month Chief Executive officer Carlos Tavares, who won plaudits for driving up margins while in charge of PSA, warned the global semiconductor shortage would easily drag into next year.

Stellantis finance chief Richard Palmer said the group did not expect chip supply to improve before the final quarter of this year, with a total projected production loss of around 1.4 million vehicles in 2021.

Palmer added that a spike in raw material prices also remained a challenge, with its impact felt more in the second half of the year.

In the January-June period Stellantis’ pro-forma adjusted earnings before interest and tax (EBIT) soared to 8.622 billion euros ($10.24 billion) from 752 million a year earlier, topping 5.938 billion euros forecast by analysts in a Reuters poll.

The group reported EBIT margin of 11.4% in the first six months, with North America at a record 16.1%, while its pro-forma industrial free cash flow was a negative 1.163 billion euros.

“The company also made significant progress on strategic matters related to electrification acceleration and software, which are fundamental pillars of our strategy,” Tavares said in a statement.

Stellantis said it would launch 11 new batter electric vehicles (BEVs) and 10 plug-in hybrid vehicles (PHEVs) in the next 24 month.

The group last month pledged to invest more than 30 billion euros through 2025 on electrifying its vehicle lineup. The pledge came just days before the European Union proposed an effective ban on the sale of new petrol and diesel cars from 2035, aiming to speed up the switch to zero-emission vehicles as part of a broad push to combat global warming.

($1 = 0.8422 euros)

(Writing by Giulio Piovaccari; editing by Agnieszka Flak and Tomasz Janowski)

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