Ferrari raises profit forecasts as losses mount at Aston Martin

Italian sports car maker Ferrari raised its annual profit forecasts after bumper results, while UK rival Aston Martin suffered an earnings downgrade that sent its shares plummeting.

Debt payments and costs from unfinished vehicles more than doubled quarterly losses for Aston in the third quarter as supply chain disruptions hampered its turnround efforts.

The losses sparked a 15 per cent tumble in Aston’s share price to 89.56p by late afternoon in London on Wednesday. They have had more than 80 per cent wiped off their value this year.

The sports car maker had expected to sell 6,600 cars in the year and increase its adjusted profit margin by 3.5 to 4.5 percentage points.

On Wednesday, it said it would sell 6,200 to 6,600 cars and margins would increase by 1 to 3 percentage points during the year.

The outlook was more buoyant for Ferrari, which said pre-tax profit would be above €1.73bn for the year, higher than the €1.7bn-€1.73bn range it gave previously. Revenues are expected to reach €5bn, up from €4.9bn.

Pre-tax profit for the Italian group rose 11 per cent to €299mn in the third quarter, although this fell slightly once currency movements were stripped out. Its share price fell 1 per cent to €196.40.

One in five Ferraris sold in the third quarter were hybrids, with the rest powered by traditional engines.

Aston’s revenues in the third quarter rose a third to £315.5mn as average prices increased by 28 per cent to £189,000.

But pre-tax losses mounted, rising to £225.9mn, from £97.9mn in the same quarter a year earlier, after costs for new investments and a non-cash revaluation of some of its debt that is priced in US dollars.

Aston took a £245mn accounting hit on the value of its debt because of the falling pound in the first nine months of the year and paid out £65mn in debt interest payments.

“No amount of sugar-coating will help here: Q3 is not the quarter Aston Martin turns the corner,” said Bernstein analyst Daniel Röska, who drew the contrast with its Italian cousin beating expectations. “Are we surprised? No, it’s Ferrari.”

Separately, Volkswagen-owned Bentley, which competes with Aston, said its third quarter operating profit had doubled to a record €575mn.

Aston Martin has been running a turnround program under Canadian billionaire Lawrence Stroll, but has been dogged by concerns over its debt levels.

The business raised £654mn through a funding deal that included a heavily discounted rights issue, and by bringing in Saudi Arabia’s Public Investment Fund as a shareholder to shore up its finances and help it pay down some of its debt.

In October, the company bought back about $200mn of its bonds, which chief financial officer Doug Lafferty said would lead to “quite significant interest savings”.

Aston said it had 400 unfinished vehicles that were awaiting parts, costing it £106mn in inventory costs, at the end of September. This echoes a problem the company faced in the previous quarter, when it said it had 350 models waiting for parts.

Chief executive Amedeo Felisa said the company was putting “pressure and attention” on fixing its supply issues and had embedded staff at supplier companies in order to rebuild the relationship and avoid future snares.

“This will for sure help us not to have the same problem in the future,” he said.

During the quarter the carmaker wrote off £71mn from past investments into its current line-up of cars and spent £213mn on the forthcoming sports car range that is due to come out next year.

“Over the last two quarters we have encountered specific supply chain challenges that have delayed our ability to meet customer demand,” said chair Lawrence Stroll.

The “headwinds” are improving in the fourth quarter but have “modestly” hit the company’s full-year guidance, he said, adding that the medium and long-term outlook was “robust”.