Aston Martin reports first-half operating loss of nearly £160m
Early signs from China, a key sales market for the DBX SUV, are positive, Aston Martin says
London — Aston Martin Lagonda reported a wider first-half loss as the British carmaker invested in the launch of its debut sport-utility vehicle (SUV), which has started to arrive at dealerships.
Early signs from China, a key sales market for the all-important DBX SUV, are positive, Aston Martin said on Wednesday in a statement, without providing specifics.
Covid-19 has meanwhile slowed the company’s efforts to reduce dealer stockpiles of its sports cars. It will put off restarting production at its main plant in Gaydon, the UK, until the end of August.
The DBX SUV, which began production during the second quarter, will make a positive contribution during the final six months of 2020, Aston Martin said. The company reported a first-half operating loss of £159.3m and negative free cash flow of £371m as it ramped up spending for the launch, while the coronavirus pandemic kept showrooms closed for much of the period.
With the DBX in production, cash flow should improve in the second half, CFO Ken Gregor said in an interview. Business improved in June, though it’s too soon to say if a recovery from the pandemic is under way, he said.
Aston Martin’s financing costs are expected to be higher at £123m in 2020, due to more expensive debt, Gregor added.
The company also said it was restating its results for 2019 to correct an error in deducting dealer and customer incentives from revenue in the US. The change resulted in an understatement of £15.3m its loss before interest, taxes, depreciation and amortisation.
Aston Martin has struggled in the less than two years since going public, with high inventory and poor sales of its core sports cars undermining efforts to replicate Ferrari’s stock market success. In the months since Canadian billionaire Lawrence Stroll bailed out the carmaker early in 2020, it has announced a CEO change and said it may need to seek additional funding.
The shares had gained 7.8% as at 11.18am in London on Wednesday. They have sunk 68% in 2020.
The $189,000 DBX is being assembled at a factory in St Athan, Wales, built on the former site of a defence ministry airfield. The manufacturer is looking to attack the ultra-luxury SUV segment occupied by the likes of Lamborghini’s Urus and Bentley’s Bentayga.
The carmaker’s effort to reduce dealer stockpiles on its other models has been frustrated by the Covid-19 crisis, and will now extend into 2021.
“We are restoring exclusivity to our sports cars,” chair Stroll said in a video posted on the company’s website. The company is “rebalancing supply to demand, which in the short term means lower wholesale volumes but necessary for future success.”
Its cash balance was £359m at the end of June, with £430m of liquidity available.
Tobias Moers, the former head of Daimler’s Mercedes-AMG performance division, will replace Andy Palmer as CEO on August 1. Moers will count on the DBX to boost sales in markets including China, where wealthy consumers’ preference to be driven by chauffeurs in roomier rides has helped high-priced SUVs catch on.
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