© Reuters. FILE PHOTO: The Stellantis logo can be seen at the main entrance of the FCA Mirafiori factory in Turin
By Giulio Piovaccari, Gilles Guillaume and Nick Carey
MILAN (Reuters) – Low global vehicle inventories and cost cuts are likely to boost Stellantis’ profit margins this year, although a semiconductor shortage and investment in electric vehicles could weigh on results, the newly formed automaker said Wednesday.
The forecast came as Stellantis, created by the merger of Peugeot maker PSA and Fiat Chrysler (FCA) in January, reported better-than-expected results for 2020, which rose its shares by around 3% in morning trading.
“Stellantis has got off to a flying start and is fully focused on realizing the promised synergies (from the merger),” said CEO Carlos Tavares in a statement.
Stellantis is the fourth largest automaker in the world with 14 brands including Fiat, Peugeot (OTC :), Opel, Jeep, Ram and Maserati.
The 2021 results should be supported by three new high-margin Jeep vehicles in North America and a strong pricing environment there. The US market has made profits at FCA for years and is initially the strongest part of Stellantis.
The group’s guidelines assume that the global COVID-19 pandemic, which closed car plants around the world last spring, will no longer result in major lockdowns.
Stellantis should also see a boost if it begins implementing a plan that aims to generate savings of over € 5 billion per year without closing plants. Tavares has also pledged not to cut any jobs.
However, a pandemic-induced global shortage of semiconductors, used from maximizing fuel economy to providing driver assistance functions, could adversely affect business.
Auto industry executives said the shortage should subside by the second half of 2021.
Stellantis said its “electrification offensive” could weigh on results this year as well. Automakers are making efforts to develop electric vehicles to meet Europe’s stricter CO2 emissions targets. This week, Volvo joined a growing number of automakers aiming for an all-electric lineup by 2030.
Stellantis plans to have fully electric or hybrid versions of all of its vehicles available in Europe by 2025, largely in line with the plans of top competitors like Volkswagen (DE 🙂 and Renault-Nissan, although Stellantis needs to push this even further.
The automaker is aiming for an adjusted operating profit margin of 5.5% to 7.5% this year.
This corresponds to an aggregated margin of 5.3% last year: 4.3% at FCA and 7.1% at PSA without a majority stake in the parts manufacturer Faurecia, which is to be spun off from Stellantis shortly.
Tavares achieved improved margins at PSA by lowering costs, simplifying the range of vehicles and creating synergies on the Opel / Vauxhall purchase, a model investors hope he can replicate at Stellantis.
The combined adjusted earnings before interest and taxes (EBIT) amounted to 7.1 billion euros last year.
At the end of 2020, the combined liquidity was 57.4 billion euros and the free cash flow was 3.3 billion euros.
A Milan-based dealer said both earnings and cash flow were “well above expectations”.
Stellantis proposed to distribute a dividend of 1 billion euros to its shareholders.
A capital market day is planned for the end of 2021 or the beginning of 2022.
($ 1 = 0.8277 euros)
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