(Bloomberg) — Stellantis NV expects to deliver another year of double-digit returns in 2022 by getting past supply snarls and labor shortages with production of more profitable vehicles.
Focusing assembly lines on higher-end models helped boost the Jeep, Ram and Peugeot maker’s adjusted operating income margin to 11.8% last year, comfortably exceeding its forecast for around 10%, Stellantis said Wednesday.
The manufacturer also announced a dividend of 3.3 billion euros ($3.7 billion) for the first year of operations following the merger of PSA Group and Fiat Chrysler.
The shares jumped as much as 6.2%, the most since Dec.
1, and were trading up 6% at 10:50 a.m. in Paris.
The results were “a very strong beat across the board,” RBC analyst Tom Narayan wrote in a note. The North American business, where Stellantis sells the popular Ram 1500 pickup truck, brought in nearly two thirds of profit by one measure.
Stellantis and its biggest carmaking peers have boosted margins by raising vehicle prices and selling a richer mix of higher-end models as shortages in the semiconductors needed for production roiled the global auto market.
Optimism is growing that the bottlenecks are easing, with Renault raising its outlook last week, and General Motors Co. also saying supply constraints were loosening.
At Stellantis, the expectation is for a gradual improvement in chip supplies toward the second half of 2022, Chief Financial Officer Richard Palmer said on a call with reporters.
“Clearly semiconductor availability continues to be an issue for the industry,” he said.
The lack of the components led to lost output of about 1.7 million vehicles last year, or a fifth of planned production, he added.
The continued uncertainty on chips could be a reason for Stellantis’s “vague” and conservative outlook both for itself and the industry, RBC’s Narayan wrote.
He pointed to a forecast for “positive” free cash flow in 2022 compared with the 6.1 billion euros achieved last year.
Semiconductors aren’t the only challenge. Cost inflation on raw materials like steel and other metals, along with a tight labor markets in North America will also weigh on operations, Palmer said.
“We’re still seeing some elevated levels of absenteeism, more in North America than in Europe, which is hurting our supply base to meet production,” he said.
“The biggest issue for 2022 continues to be supply volatility and inflation.”
Chief Executive Officer Carlos Tavares is under pressure to achieve synergies of 5 billion euros pledged as part of the merger.
Last year, the net cash benefit from synergies was 3.2 billion euros, the company said Wednesday, while adjusted operating income rose to a record 18 billion euros.
Tavares is scheduled to unveil the automaker’s longer-term strategy next week.
This will come after a plan to plow 30 billion euros into electric cars and software, and partnerships to develop digital features.
(Adds analyst comment in fourth paragraph.)
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
