Stellantis Warns of Turbulent 2024 After Operating Profit Drop
Potential Impact of Strikes on Stellantis
Stellantis cautioned about a challenging year ahead after experiencing a 10% decline in operating profit during the second half of 2023. This drop was primarily attributed to strikes that led to significant stoppages at its North American operations, which are crucial for its profitability.
Challenges in the Automotive Industry
Union strikes in North America resulted in substantial salary increases for workers at major automakers, including Stellantis. Furthermore, the global demand for electric vehicles remains subdued, while Chinese competition continues to intensify. These factors, combined with ongoing cost pressures and geopolitical tensions, have contributed to a tough outlook for car manufacturers.
Financial Performance
Despite the challenges, Stellantis reported an adjusted operating profit of 10.2 billion euros in the July-December period, surpassing analysts’ expectations. This positive performance led to a surge in Milan-listed shares, reaching an all-time high.
Impact on Operating Profit and Margins
The margin on adjusted operating profit decreased to 11.2% in the second half of 2023, down from 12.3% in the same period of 2022. In North America, adjusted operating profit fell by 16% to 5.271 billion euros, with the margin declining by 160 basis points to 13%.
Outlook and Commitment
Despite the challenges, Stellantis remains committed to achieving double-digit margins on adjusted operating profit and positive industrial free cash flow for the coming year. The company’s CFO emphasized that this commitment reflects their dedication to overcoming various headwinds in the industry.
Production Cost Pressure and Future Projections
Stellantis estimated that the strikes in 2023 cost the group nearly 750 million euros in terms of profitability and around three billion euros in terms of revenue. The company expects the impact of these strikes on production costs to be significant in 2024 but is confident in its pricing power in North America.
Financial Plans
In addition to proposing a higher dividend for shareholders, Stellantis plans to initiate a share buyback program worth 3 billion euros in 2024. These initiatives are aimed at delivering encouraging cash returns to the company’s investors.
Conclusion
Stellantis faces challenges ahead, but it remains committed to navigating through the turbulent times in the automotive industry and delivering positive financial results for its stakeholders.
