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Stellantis Shrugs Off Supply Issues, Slowdown With Rising Profit

Published July 28, 2022

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Stellantis NV expects to overcome supply-chain snarls to extend strong earnings into the second half of the year as the maker of Jeeps and Fiats focuses production on its most profitable models.

Stellantis’s adjusted operating income margin came in at 14.1% in the six months through June, it said Thursday, comfortably beating analyst predictions. The automaker confirmed its forecast for double-digit profitability for the full year.

Stellantis and its carmaking peers have bolstered margins by raising prices and selling more high-end models in response to production curbs sparked by the chip shortage. Mercedes-Benz AG, which also sees double-digit returns this year, on Wednesday raised its outlook on the back of solid orders and healthy demand. Volkswagen AG earlier Thursday reported second-quarter results that beat expectations. 

“We’re very positive about the first half and see a continuation in strong performance going into second half,” Chief Financial Officer Richard Palmer said on a call with reporters.

Stellantis rose as much as 3.9% in Paris. The shares are still down about a fifth this year.

Stellantis confirmed its full-year outlook for a double-digit margin and positive industrial free cash flow, but significantly lowered its predictions for growth in several key markets. It now expects the wider European and North American markets to shrink 12% and 8% this year, after previously seeing a 2% decline and stable sales, respectively.

Chip Issues

The company’s global unit sales fell 7% to 2.93 million vehicles in the first half as persisting supply-chain issues including a shortage in semiconductors curbed production.

Scarcity of chips “will continue to be an issue for the industry through the end of the year,” Palmer said. “I think it’s improving but it’s a slow process.”

The executive took aim at what he called “bullish” forecasts of improvements in semiconductor supply in the second half of the year by some rivals, saying Stellantis has no evidence of that and will remain prudent. 

North America remained the company’s standout region with a margin of 18.1%, bolstered by the Jeep sport utility vehicle and Ram truck brands. Profitability was lowest in Europe, where shipments fell 18% and the margin came in at 10.4%. 

The company had just under 4 billion euros in extra costs in the first half of the year, including 3 billion euros from higher prices for raw materials. 

Stellantis is planning to plow 30 billion euros into electric cars and software, and has signed partnerships to generate extra revenue from software-driven features. In a shift in strategy on China, the automaker said this month it would halt Jeep production in the country and end a venture with a local manufacturer.

The views and opinions expressed in this story are those of the authors and do not necessarily reflect the official policy or position of NADA.

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