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UPDATE 3-Pricing buoys Stellantis as fight for electric markets heats up

UPDATE 3-Pricing buoys Stellantis as fight for electric markets heats up

Reuters · 07/28/2022 02:31
UPDATE 3-Pricing buoys Stellantis as fight for electric markets heats up

Net revenue up 17% in H1 to 88 bln euros

Adjusted EBIT rose 44% to 12.4 bln euros, above forecast

H1 group's adjusted EBIT margin at 14.1%

Co generated 5.3 bln euro cash in H1

Adds details, context

By Giulio Piovaccari

- Strong pricing power and sales of high margin vehicles including electric ones helped Stellantis STLA to beat profit forecasts in the first half of the year despite headwinds from energy and raw material inflation and semiconductor scarcity.

"We are ahead of Tesla in Europe in electric vehicle sales, and far from Volkswagen," Chief Financial Officer Richard Palmer said on Thursday presenting results, which saw a 44% operating income rise in the January-June period, on a pro-forma basis.

Initially seen as a laggard in the race to electrification, Stellantis this year rolled out an ambitious plan to double its annual revenues by 2030 and turn its range from traditional combustion engines to low-emission models.

CEO Carlos Tavares said Stellantis, whose brands include Fiat, Peugeot and Dodge, was "delivering an outstanding performance and executing its bold electrification

strategy."

"We are shaping Stellantis into a sustainable mobility tech company that's fit for the future," he said.

The world's fourth largest carmaker said its adjusted earnings before interest and tax (EBIT) amounted to 12.4 billion euros ($12.7 billion) in the first half, topping analyst expectations of 9.42 billion euros in a Reuters poll.

Rival Volkswagen VLKAY confirmed its full-year outlook on Thursday but warned the war in Ukraine and threats to European energy supply loomed over the second half.


MARGINS RISE

Milan-listed shares were up 3.8% by 0750 GMT for Stellantis, the company formed at the beginning of 2021 through the merger of Fiat Chrysler and Peugeot maker PSA. That outperforms a 1.3% rise at Italy's blue-chip index .FTMIB.

"Results are clearly very strong and surprising," Banca Akros analyst Gabriele Gambarova said.

Palmer said that the group, though its range of premium vehicles, was well placed to cope with the global rise in inflation.

"We will look to pass rising inflation costs to customers on the market until feasible," he said.

Net pricing accounted for over 5.8 billion euros of the overall operating income in the first half, Stellantis said in slides prepared for its earnings presentation.

Foreign exchange also supported the results, with Palmer saying a stronger dollar contributed to the first half adjusted EBIT to the tune of around half a billion euros.

The margin on adjusted EBIT rose to 14.1% from 11.4% a year earlier, with a double-digit result for all of the group's five regions and a record 18.1% in North America, where Stellantis made almost half of its sales in the six months.

Palmer however remained cautious regarding a solution to the semiconductor shortage affecting the sector, saying the issue will persist for the rest of this year.

"We see some improvements quarter by quarter, but it's a slow process," he said.

Stellantis confirmed its full-year forecasts for a double digit operating income margin and for a positive cash flow.

$1 = 0.9784 euros)


(Reporting by Giulio Piovaccari and Gilles Guillaume
editing by Agnieszka Flak and Keith Weir)

((giulio.piovaccari@thomsonreuters.com))