Aston Martin Sales to Extend Slide Ahead of SUV Launch
Aston Martin Lagonda Global Holdings Plc said revenue will continue to slide as it braces for the impact of the coronavirus outbreak on Chinese demand for its crucial DBX SUV.
The stock fell 16% Thursday after Aston Martin said sales will slump in the first six months of 2020, with almost all earnings coming in the second half once the Gaydon, England-based company starts deliveries of the DBX, a model on which its relying to double output.
Chief Executive Officer Andy Palmer said the DBX is selling well, with orders already ahead of the planned retail target for 2020. At the same time there are concerns about the impact of the China epidemic, since the country is regarded as prime sales territory for the automaker’s first-ever sport-utility vehicle.
“China is an important region for us,” Palmer said in a phone interview. “The release into China is quite late in the year, so we’ll hope and pray that the virus is done by then.”
Aston shares have spiraled downward since listing in 2018, with the company hurt by Brexit and sluggish sales of its entry-level Vantage model. It last month resorted to a 500 million-pound ($645 million) fund-raising to shore up the balance sheet, including a rights issue and an investment from Canadian billionaire Lawrence Stroll, who will become executive chairman.
China is Aston Martin’s fast-growing market and the DBX is viewed as key to boosting sales since roads there can be poor and wealthy individuals often prefer to be chauffeur driven, making an SUV a better match than a sports car.
Excluding the DBX, wholesale deliveries are expected to be “materially lower” than last year as Aston Martin focuses on reducing inventories that have pushed down prices. Palmer said it’s vital that the company better match supply and demand, and that it must “take the medicine and get it done.”
Aston Martin swung to an operating loss of 37 million pounds last year as revenue slumped 9%. It said Chief Financial Officer Mark Wilson will step down in April 30 by “mutual agreement.”
The stock traded 14% lower at 335.8 pence as of 9:40 a.m. in London, more than 80% below its price of 19 pounds in the October 2018 initial public offering. That values the group at 765 million pounds, compared with 27 billion euros ($30 billion) at Ferrari NV, whose expansion into higher volume production Aston Martin is seeking to replicate.
As part of the bailout announced Jan. 31, Stroll and other major Aston investors agreed to take part in a 317 million-pound rights issue. That was priced today at 207 pence a share, less than two-thirds of the current stock price.
The discount was steeper than expected, Citigroup analyst Angus Tweedie said in a research note. “But with a number of firm commitments de-risking the balance sheet and DBX orders progressing well, we remain buyers,” he said.
©2020 Bloomberg L.P.