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Aston Martin Profit Advances But Not Enough For Investors

Aston Martin Profit Advances But Not Enough For Investors.

New SUV Will Be Called The DBX.

British luxury sports-car maker Aston Martin’s shareholders didn’t like its 3rd quarter results, despite almost doubling sales compared with a year ago.

The shares, floated on the stock market in early October, shed more than 5% after the results.

Aston Martin sales almost doubled to 1,776 compared with the same period last year in the latest quarter, while revenue climbed 81% to £282.4 million. Earnings before interest and tax (EBIT) rose to £25.3 million from £8.6 million.

Investors were looking at long term profit targets like the 30% for EBITDA (earnings before interest, tax, depreciation and amortisation) and losing faith that it might be achieved. Analysts said they doubted new products like the DBX SUV would have the power to raise profits to the level of a rival like Ferrari. 

The risk of a chaotic Brexit that might interrupt production and sales also troubled investors.

The sales increase was driven by the U.S. sales, up 185%, and Asia Pacific, up 133%. Aston Martin said it expects sales to reach the high end of its estimate of 6,200 to 6,400 for all of 2018. A new factory in Wales will increase potential capacity to 14,000 from the current maximum of about 7,000.

Before the flotation, investors were questioning Aston Martin’s accounting methods, said to overstate its profitability by placing research and development expenses on the balance sheet, rather than writing them off against profits.

Aston Martin has plans for hybrid and electric models to meet more stringent emissions rules including the revival of the Lagonda name plate for an electric luxury brand. The Lagonda electric SUV will arrive in 2021.

CEO Andy Palmer said its new Aston Martin SUV will be called the DBX and will go on sale in 2020. The DBX will compete with the Rolls Royce Cullinan, Bentley Bentayga and Lamborghini Urus as the SUV of choice for the rich and famous.   

Aston Martin’s biggest market is the U.K. with about 30% of its sales, followed by the U.S. with 25% and Asia Pacific (16%).

Aston Martin has the ambition to be classed as Ferrari’s biggest competitor and priced as such on the stock market, but analysts think the company has a way to go.

Aston Martin’s prices and gross profit margins are nowhere near Ferrari’s, yet it has a cost base that’s very similar.


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