Aston Martin shares plunge on volume target cut, lingering debt

Shares of Aston Martin were down by 11% at 10:01 a.m. London time Wednesday morning, slightly paring losses incurred after the British luxury carmaker cut its volume target due to production problems for its new DB12 model and posted a bigger-than-expected quarterly loss.

Company shares had plunged by as much as 20% in earlier trade.

Aston Martin reported an adjusted operating loss of £48.4 million ($58.8 million) for the three months to the end of September and a net revenue of £362.1 million, below a company-compiled consensus of £370 million.

Deliveries of the next-generation DB12 sports car began last quarter and the company now expects 2023 volumes to come in at 6,700 units, down from a previous projection of around 7,000 units.

"The DB12 production ramp up was temporarily affected as supplier readiness and integration of the new EE platform that supports the fully redeveloped infotainment system was delayed," Aston Martin said in its earnings report on Wednesday.

The company added that these issues are now resolved but impacted third-quarter volumes and full-year production capacity.

Aston Martin Executive Chairman Lawrence Stroll said the launch of the DB12 has seen "extraordinary demand" and is bringing in new customers, with 55% of initial DB12 buyers new to the brand. The company will launch a second new sports car in the first quarter of 2024 and expects a "similarly resounding response."

"Commencing deliveries of our next generation of sports cars is a major milestone marking the beginning of a completely new line up of front engine sports cars that will reposition Aston Martin as an ultra-luxury high-performance brand, enhance our growth and bring higher levels of profitability," Stroll added.

The company maintained its 2023 outlook, citing this strong demand for next-generation sports cars as powering its plans to boost cash and margins.

Still a 'big pile of debt'

The British household name sought to raise more than £200 million from investors in the summer in a bid to pay down its substantial debt pile.

Shareholders including Stroll's investment consortium Yew Tree and Saudi Arabia's Public Investment Fund snapped up new shares in a bid to alleviate the debt burden. By the end of July 2023, the company's share price had more than tripled from the all-time low seen in November 2022, but has since slid back into steady decline.

Russ Mould, investment director at British stockbroker AJ Bell, said the disappointing earnings had come at a bad time for Aston Martin's hopes of a share price recovery.

"The company is seeing strong demand but, with losses coming in ahead of expectations, there is little reason for the market to give Aston Martin the benefit of the doubt for even the smallest misstep," he said.

"For now, little credence is being given to a 2024 forecast for £2 billion in revenue and £500 million in adjusted earnings."

Aston Martin recorded net debt in the third quarter of £750 million, down from £766 million at the end of 2022, and said it remains focused on reducing leverage and retiring debt as outlined in July.

"It is still sitting on a big pile of debt and continues the painful effort of deleveraging a strained balance sheet. Undoubtedly, progress has been made in fixing some of the problems faced by the business but it all feels a bit too little too late," Mould added.

"With the shares trading at a tenth of the level at which they listed in 2018, the optimistic comparisons Aston Martin made for itself with Italian rival Ferrari look as fanciful as they ever did."