Aston Martin Plunges After Cutting Vehicle Sales Forecast on Challenging Outlook

(Bloomberg) -- Aston Martin Lagonda shares plunged the most since they were listed less than a year ago after the British luxury carmaker lowered its full-year sales forecast in response to a deepening auto industry slump in Europe.

The sports-car manufacturer based in Gaydon, England said Wednesday that deliveries to dealers will decline to as low as 6,300. That compares with a plan unveiled in May for the sale of as few as 7,100 vehicles.

Aston Martin has already blamed sluggish sales on uncertainty about Brexit and Wednesday’s warning shows a wider market slump in Europe is also starting to bite. In the second quarter, demand fell by 22% in the U.K., its biggest market, and 28% in Europe. By contrast, Asia-Pacific and the Americas region showed double-digit gains.

The lower volume forecast was “more concerning” than supply issues detailed earlier this year, Credit Suisse analyst Daniel Schwarz said. “Dealers are ordering fewer cars. It is not yet retail, according to the company, but it’s wholesale which might reflect that dealers are more cautious going into the second half.”

The cut to the outlook is another blow in Aston Martin’s struggle to convince investors that it can make the transformation from niche player to successful listed company, and keep a promise to take on supercar maker Ferrari NV. Since an initial public offering in October at 19 pounds a share, the stock has more than halved. It was down 23% on the day at 799.60 pence at 10:08 a.m. in London.

The company’s sterling-denominated bonds due April 2022 also declined, falling as much as 2 pence to 97.4 pence on Wednesday, the biggest drop since they were issued in April 2017, according to data compiled by Bloomberg.

Most automakers and their suppliers are reeling from a significant slowdown in China and Europe that began last year. Mercedes-Benz maker Daimler AG warned this month of lower-than-expected profits while parts supplier Continental AG also slashed its earnings outlook. French carmaker Peugeot-maker PSA Group, while posting improved profit on Wednesday, painted a gloomier picture of demand in Europe and China.

“We are today taking decisive action to manage inventory and the Aston Martin Lagonda brands for the long-term,” Chief Executive Officer Andy Palmer said in a statement.

Aston Martin also made a provision of 19 million pounds ($24 million) that’ll be accounted for during the second quarter. Taken together with the reduced sales outlook, that will result in an expected operating return on sales of about 8% for this year. The company said it’s working to boost efficiency and reduce costs.

New Plant

The company, known for sports cars used in James Bond movies, plans to double volumes by 2023, which will depend on the successful launch of the DBX, its first sport utility vehicles. The car will be made at a new plant in St Athan in Wales, where first pre-production vehicles are moving down the line. First orders will be taken from August with a planned output start during the second quarter of next year.

“Aston Martin is a medium-term story and its future is unlikely to be defined by 2019’s performance,” Goldman Sachs analysts led by George Galliers wrote in a note. “Nevertheless, concerns around operating risk as well as questions on Aston’s ability to sustain volumes on vehicles that are more than 12 months old are all areas of concern for investors.”

--With assistance from Irene García Pérez.

To contact the reporters on this story: Elisabeth Behrmann in Munich at ebehrmann1@bloomberg.net;Simon Foy in London at sfoy8@bloomberg.net

To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, John Bowker

©2019 Bloomberg L.P.