Aston Martin’s Profit Slides on Sales Slump and Rising Investment
Aston Martin Lagonda reported lower first-quarter earnings as the luxury automaker lavished spending on new models and sales in the U.K. and mainland Europe declined.
The stock touched a new low Wednesday after Gaydon, England-based Aston Martin said Brexit is weighing on demand in the company’s home market, just as it pumps more cash into expanding the lineup in a bid to replicate the success of Ferrari NV in moving toward higher-volume carmaking.
Aston Martin is struggling to convince investors that it can make the transformation from niche player to successful listed company after an initial public offering last year. While the company said it’s on course to sell 7,100 cars in 2019 as it targets double that volume by 2023, the real spur to growth and profit won’t come until the introduction of the DBX SUV from 2020.
“The share price is regrettable,” Chief Executive Officer Andy Palmer said by telephone. “I think the catalyst, and clearly what people are waiting for, is the execution and delivery of DBX.”
Shares of Aston Martin fell as much as 3.5% before recovering to trade 0.8% higher at 825.6 pence as of 8:34 a.m. in London. That’s 56% below October’s IPO price of 19 pounds and a far cry from gains at Ferrari, which is more profitable with a stronger balance sheet and earnings multiples akin to luxury-goods companies.
Aston Martin’s adjusted earnings before interest, tax, depreciation and amortization fell 35% to 28.3 million pounds ($37 million), according to a statement, lower than the 31 million pounds predicted by analysts.
At the same time, the company sold 1,057 cars in the three months, a 10% gain, and said a new factory in St Athan, Wales, began manufacturing trials on April 15, with the first pre-production cars due to roll out next month. The plant is regarded as key to growth as it will build both the DBX and a lineup of electric models.
Sales declined 9% in the U.K., where confusion surrounding the outcome of Brexit negotiations has hit demand, and 4% in mainland Europe. By contrast, purchases in the Asia-Pacific and Americas showed double-digit gains.
©2019 Bloomberg L.P.