Stellantis earnings fall as automaker trims bloated inventories

Giulio Piovaccari and Gilles Guillaume

MILAN (Reuters) – Supply cuts and price cuts cut Stellantis’ third-quarter revenue by 27%, the automaker said, as it seeks to correct bloated inventories and poor commercial performance that led to a major profit warning last month.

However, Thursday’s results were slightly better than expected, with Stellantis shares up 2.3% at 1035 GMT, the best performance among the blue chips on the Milan bourse.

“Inventory declines in the United States are occurring at a faster pace than expected,” new Chief Financial Officer Doug Ostermann said on the call, adding that he expects U.S. dealer inventories to decline by 100,000 vehicles ahead of the end-November target.

Total inventory as of Sept. 30 was 1.33 million units, down 129,000 from last year, Stellantis said. In the United States, total dealer inventories fell by more than 80,000 between June 30 and October 30.

Ostermann, who previously headed Stellantis’ China operations, replaced Natalie Knight this month as part of a senior management shakeup aimed at correcting strategic missteps, particularly in North America.

Stellantis’ specific challenges combine with broader struggles for Western automakers, including weak global demand, particularly for electric vehicles (EVs), technology transition challenges and increased competition from Chinese peers.

Europe’s biggest automaker Volkswagen is weighing plans to close at least three factories in Germany and lay off tens of thousands of employees in a more radical overhaul than expected.

Stellantis shares have lost about 40% of their value this year.

Citi analysts said on Thursday they remained cautious on the stock, seeing “little upside…despite sharp underperformance this year” amid an expected further deterioration in global pricing, competition from China and 2025 European Union regulations. emissions and market penetration of electric vehicles.

SIGNALS A POSSIBLE REDUCTION OF DIVIDENDS AND SHARES BUYBACK

Stellantis confirmed its recently cut full-year guidance on Thursday.

After reporting a 40% decline in adjusted operating profit (EBIT) in the first half, Stellantis last month forecast full-year adjusted operating profit of 5.5% to 7%, below its previous double-digit estimate and also an increase funds. up to 10 billion euros.

It also signaled a possible dividend cut and share buybacks in 2025, although Ostermann said Thursday he was confident the board would discuss “the right dividend level next year.”

“Given the current share price, I think it would be very appropriate for us to talk about a buyback program for next year,” he said, adding, however, that nothing has been determined yet.

Ostermann also said Stellantis decided Thursday not to narrow its full-year guidance range to allow itself “the flexibility … to really take all the necessary actions throughout the end of the year to make sure that we bring our reserves into line.”

“I didn’t want to… handcuff management,” he added.

Third Bridge analyst Orwa Mohamad said Stellantis needs to introduce new products and expand into additional segments, potentially launching more European models in the United States under the Jeep brand.

“They may also have to look at acquisitions in North America to strengthen their portfolio,” he said.

Mohamad added that a return to profitability is likely in 2025 as Stellantis plans major launches in key higher-margin segments.

Stellantis’ third-quarter revenue was 33 billion euros ($35.8 billion), beating analysts’ expectations of 31.1 billion euros, according to a Reuters poll taken after Oct. 16, when Stellantis first provided preliminary quarterly unit sales forecasts. and supplies.

Deliveries fell 21% to 1.17 million vehicles. The main reason for the decline was gaps in the product line, Ostermann said, although he added that those gaps should start to close.

The company said it plans to release about 20 new models in 2024.

These include Peugeot’s new 3008 mid-size SUV, Citroen’s C3 hybrid and all-electric e-C3, and the Alfa Romeo Junior sporty compact SUV are already on the streets or available to order, the group said.

($1 = 0.9215 euros)

(Reporting by Giulio Piovaccari in Milan and Gilles Guillaume in Paris; Writing by Alvise Armellini and Giulio Piovaccari; Editing by Gavin Jones, Mark Potter and Emilia Sithole-Matarise)