Porsche cuts profit forecast: poor sales and supply problems

Porsche AG shares posted their biggest decline ever after the luxury car maker cut its forecast for the current year, saying a shortage of aluminum parts could force it to halt production of some models .

The German manufacturer now expects a profit on sales percentage of 15%, down from the high of 17% . The Volkswagen AG subsidiary, which is struggling with weak demand in China, also cut its forecast for revenue and the share of electric vehicle sales. Here is the performance of the stock today and over the past week:

The supply shortage is the result of the flooding of a production plant of a major European supplier, Porsche said on Tuesday. The problem affected the aluminum components used in all of the brand's vehicles and production could be affected for several weeks. Porsche fell 7.7% in Frankfurt, its strongest intraday drop since trading began in September 2022.

Porsche “will certainly be called into question for its management of group risks that have left it so vulnerable to a critical supplier,” Bernstein analysts led by Stephen Reitman said in a note. The company told analysts that the problems will prevent production of at least 10,000 cars in the second half.

The supplier declared force majeure, a measure companies take when events beyond their control prevent them from operating. In recent weeks several European countries, including Switzerland, have been hit by severe floods. Morgan Stanley analyst Javier Martinez de Olcoz Cerdan said in a note that the problems suggest other automakers could also be affected.

Porsche stock is down about 13% this year. Volkswagen fell as much as 2.3%.

Audi, another premium brand owned by Volkswagen, said the floods had caused a shortage of special aluminum alloys at several suppliers, but that the shortages had not had a direct impact on production. “We are in close contact with our suppliers and are working to avoid any supply bottlenecks,” an Audi spokesperson said.

The problems of the aluminum producer that supplies Porsche will lead, it is estimated, to 10 thousand fewer cars sold, with a drop in gross profit.

With this in mind, just two weeks ago Porsche concluded an agreement with the Norwegian aluminum producer Hydro, which should supply "Green" aluminum from hydroelectric energy. The problem is that this agreement is relatively recent so it will take time to take effect.

Just an aluminum problem, or also a market problem?

Porsche's deliveries fell in the first half after consumers turned away from buying expensive goods in China, where the prolonged housing crisis is deterring luxury buyers. China's slowdown is impacting demand for a wide range of luxury items, including watches and designer clothing. Porsche also faces high costs due to several model changes, and has pointed to next year as a turning point.

Although Porsche did not name the supplier, aluminum components maker Constellium SE suspended operations at its Sierre and Chippis plants in Switzerland earlier this month following severe flooding. The manufacturer's customers include Porsche, Volkswagen, Stellantis, Mercedes-Benz, Ford and BMW, a regulatory filing said.

Volkswagen and Mercedes-Benz declined to comment. BMW said it was not affected by the supply problems. Constellium, which operates several plants in Europe and the United States, could not immediately be reached for comment.

Porsche's downgrade follows the manufacturer scaling back its electric vehicle sales ambitions on Monday amid weaker-than-expected momentum for plug-in models in Europe and China. Perhaps these problems are more serious than those of aluminum supply.

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The article Porsche cuts earnings forecasts: poor sales and supply problems comes from Economic Scenarios .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/porsche-taglia-le-prvisioni-degli-utili-scarse-venite-e-problemi-di-fornitura/ on Tue, 23 Jul 2024 14:05:50 +0000.