Aston Martin exceed expectations in 2022 turn around

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Aston Martin exceeds financial expectations as average sale price soars to almost $330,000 and DBX boosts demand.

Aston Martin has posted a profitable end to 2022, stirring hopes among investors and fans that the struggling luxury brand can turn around a prolonged loss-making spell.

The company made a narrow operating profit of £6.6 million (AUD$11.75 million) for the final three months of 2022, boosted by a higher average selling price for its cars of £184,000 (AUD$327,000), up from £152,000 (AUD$270,000) last year, excluding specials.

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A weaker pound helped Aston Martin during the year, although not enough to negate a sharp rise in operating expenses such as raw material costs. Overall, the company lost £118 million (AUD$210m) for 2022 as a whole, an increase on 2021’s figure of £76 million (AUD$135m).

The chink of light shown by the better than expected final quarter results roused the financial markets and pushed the stock price higher than it has been in more than six months.

“We view the results, outlook and re-confirmation of medium-term targets as positive,” banking firm Jefferies said in a note to investors.

Some of Aston’s boost came courtesy of an increase in wholesales (sales to dealers) of the Aston Martin DBX SUV, a car that has lagged behind its potential due to the slower than expected roll-out of the 707 performance version after suffering supplier and production issues.

Total DBX sales last year climbed 7 per cent to 3219 units, accounting for half of all Aston’s 6412 wholesales last year and illustrating again just what a difference an SUV can make to the sales figures for ultra-luxury brands such as Aston Martin, Bentley, Lamborghini and Rolls-Royce.

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Aston is predicting a much smoother ride for 2023 as it enters the delivery phase of the long process of overhauling its front-engined sports cars, with the first model (likely to be the updated Aston Martin DB11) reaching first customers in the autumn.

There’s a lot riding on the successful launch of replacements for the DB11, Vantage and DBS as the last of the (ex-CEO) Andy Palmer-era cars roll down the production lines, mostly as high-value specials like the V12-powered DBS 770 Ultimate.

But Aston reckons it has nailed the production issues that have been dogging it of late. “Seventy per cent of the value is coming from outside so we have decided to have suppliers as partners, not only as suppliers,” Amadeo Felisa, Aston Martin CEO, said on a call to analysts on Wednesday. The company met with 40 of its biggest suppliers earlier in February, Felisa said, with the aim of strengthening its relationship as it rolls out the three upgraded front-engined sports cars. “The production phase of the new cars will be better than it was for the 707,” Felisa said.

Production of the first of the three models – Aston’s traditional core – begins on 1 April ahead of deliveries in the third quarter, with the second model making its move in the second half. The whole process to bring all three of the cars to production will take 18 months, meaning it will be well into 2024 by the time this phase finishes.

Aston will reveal the cars, as well as its full electrification plan, to investors and the wider world at a capital markets’ day in the summer, chairman Lawrence Stroll said on the earnings call. “You’ll see the light at the end of the tunnel of how we get to 10,000 cars a year,” Stroll said. The 10k target is a “medium-term” goal for the company as it fleshes out its range and targets a wider audience, helped in part by ongoing exposure to Formula 1.

Ahead of that, the company reckons it can grow to 7000 sales this year, a tough call given its core sports cars are mostly on run-out and achieve an EBITA (earnings before interest, tax and amortisation) margin of 20 per cent, up from 14 per cent in 2022.

Aston Martin last year raised £654 million (AUD$1.16 billion) from investors, including £78m (AUD$139m) from Saudi Arabia’s sovereign wealth fund, the PIF, giving it a 16.7 per cent stake in Aston Martin and two board seats.

The raise was partly used to pay down debt, which had ballooned as the company kept itself afloat during the Covid crisis while working to refresh the range and sort through production issues related to the Valkyrie hypercar.

Aston showed a debt reduction from £892 million (AUD$1.59bn) by the end 2021 to £766 million (AUD$1.36bn) by the end of last year – still high for a company of this size but potentially manageable if the new product resonates with enough buyers to finally allow the company to deliver consistent profits, something that has eluded it through most of its life.

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