Yahoo Finance Stellantis N.V. (NYSE:STLA) Q1 2024 Earnings Call Transcript
Stellantis N.V. (NYSE:STLA) Q1 2024 Earnings Call Transcript April 30, 2024
Stellantis N.V. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Ladies and gentlemen, welcome to the Stellantis First Quarter 2024 Shipments and Revenues Call. I will now hand you over to your host, Mr. Ed Ditmire, Head of Investor Relations at Stellantis. Mr. Ditmire, please go ahead.
Ed Ditmire: Thank you. Hello everyone, and thank you for joining us today as we review Stellantis Q1 2024 shipments and revenues. Earlier today, the presentation material for this call, along with the related press release, were posted under the investor section of the Stellantis Group website. Today, our call is hosted by Natalie Knight, the company's Chief Financial Officer. After a presentation, Ms. Knight will be available to answer questions from the analysts. Before we begin, I want to point out that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page two of today's presentation. As customary, the call will be governed by that language. Now I would like to hand over the call to Natalie Knight, CFO, Stellantis.
Natalie Knight: Good morning and thanks, Ed. I'm pleased to present our shipment and revenue figures for the first quarter of 2024. Year over year revenues and shipment comparisons lagged stable customer sales due to transitions and our product offering, inventory management actions, regional mix and foreign exchange impacts. However, Q1 is also a period where we delivered improvements in key commercial dynamics. This is especially important as we move forward through 2024, where we're entering a phase which will be characterized by significant product portfolio updates and expansion, underpinning growth as the year progresses and right into 2025. So, let's start with our next chart. During Q1, our global sales to customers remain steady at 1.5 million units driven by material increases in two regions, the Middle East and Africa, up 23% and enlarged Europe plus 6%.
Despite the stable retail sales development, shipments decreased by 10% to 1.3 million units, and net revenues declined 12% to EUR41.7 billion due to destocking and manufacturing initiatives as we prepare for significant new product launches later this year, as well as a challenging comparison to Q1 ‘23, when we build inventory by 228,000 units after prolonged supply constraints. Excluding these temporary dynamics, both shipments and revenues would've increased. In Q1, we also delivered improvement on three key commercial KPIs, which are setting the stage for us to deliver increased momentum later this year, which is why we are confirming our financial guidance today. First, we've stabilized and improved our market share sequentially in North America and Europe.
In Europe, market share improved 230 basis points sequentially to 19.2%, while in North America, market share was stable with the prior period at 8.4%, demonstrating resilience even amidst multiple plant shutdowns as we geared up for the launch of our new EV models. Second, we delivered strong results in our strategic areas, low-emission vehicles, third engine markets outside of North America and Europe as well as commercial vehicles. And third, we've made important progress in preparing for a powerful new product rollout later this year. In 2024, Stellantis is launching 25 new or updated vehicles, including 18 BEV versions with the overwhelming minority of this still ahead of us. Let me walk you through our headline figures now. Consolidated shipments decreased by 10% year over year, impacted by destocking and manufacturing preparations were making to prepare to best position ourselves for the extensive product launches later this year.
Let me provide a little more color here. In North America, volumes were reduced by nearly 100,000 units due to changes in production due to this product evolution, this includes 50,000 vehicles at our Brampton Assembly Plant. Following the discontinuation of the Chrysler 300, the Dodge Charger and the Dodge Challenger. We're now preparing to ramp up the next generation of the charger in Q3. Similarly, we completed the transition at our Sterling Heights assembly plant for the updated Ram 1500 light duty truck, which led to a decrease of almost 20,000 units year over year. We also had production downtime at our Stellantis van plant to prepare for capacity increases of our Ram ProMaster, which resulted in 12,000 fewer vehicles produced year-over-year.
Finally, Q1 '23 included 12,000 units of Jeep Cherokee in the Belvedere assembly plant, which has been idled since then as we prepare for other electrification initiatives. I'll speak more about inventory in a moment, but it's important to remember that our Q1 focus has been on selling down prior-generation products in preparation for the launches of next-generation products, based on our new Stella platforms, which is expected to ramp up significantly in the second half of the year. Moving on to revenue. Lower volumes were the primary driver of the minus 12% development. Mix was also negative, due to a lower proportion of high ASP North American products in the period. The rest of the decline comes from foreign exchange, which we were able to more than offset with solid relative net pricing spot on the revenue development in the first quarter.
Let's briefly discuss performance by segment. In North America, shipments declined 20%, largely due to the portfolio transitions I previously mentioned. The revenue decline was smaller at 15% due to positive nameplate mix, carryover actions and lower incentive spend in the period. A special call out for Q1 is our strong performance in the PHEV segment, where sales increased nearly 80% and contributed strongly to the global LEV growth of 13% during the period. This progress makes us a strong number two in LEVs in the U.S. Behind Tesla. With North America adding its first BEV models in H2, all on a multi energy platforms, we are confident in our ability to navigate the complex landscape of electrification. Moving to Europe, where the market has been tougher, shipments declined 6% due to the timing of production, where we took special actions to avoid oversupplying the market, given our heavy slate of upcoming model launches.
Revenues are down 20% due to the higher buyback commitments related to our recent B2B deals with SYK and Avon [ph], as well as a somewhat lower BEV mix now at about 13% of sales, despite an improving net position versus our peers in passenger cars and our continued number one position in the important BEV Commercial Vehicle segment, where we enjoy a 33% share. Moving forward, we believe we can improve BEV even further due to the white space BEV model introductions in the coming quarters, including the extremely affordable Citroen eC3 and several C segment BEVs such as the high-performance Peugeot E3008 with the up to 700 kilometers of range. Shifting to our third engine, let me start with the Middle East and Africa, which delivered the Group's highest growth rate with consolidated shipments up 42% year-over-year.
Our sales in the region put Stellantis in a strong number two position. Fiat's business in Algeria was the biggest driver, where we multiplied our shipments seven-fold year-over-year. Overall, revenues in the Middle East and Africa grew 24%. Moving on to South America, where we are the undisputed market leader, revenues were stable despite lower shipments, thanks to strategic price increases and the growth of our parts and services business, where we benefited from the recent acquisitions of DPaschoal in Brazil and Nore Alto in Argentina. For our Small China IAP and Maserati segments, market tightening and strategic shifts have led to reduced shipments and revenues. China, IAP volumes were down 46%, due to new emissions regulations, prompting inventory adjustments, while Maserati shipments declined over 50% reflecting the retirement of three key models.
The Levante large SUV as well as the Ghibli and the Quattroporte Sedans. Maserati is now focusing in the near term on a tighter mandate in terms of its portfolio, reinforcing its luxury positioning with high-end variance like the Folgore and the BE versions of the Grecale, Gran Turismo and Gran Cabrio, and actioning new cost reduction strategies appropriate for its near-term scale while preparing for exciting new products based on next-generation platforms. Although they're not part of these numbers, I'd also like to congratulate our partner lead motor whose Q1 sales grew by 218% and are now in the number three position amongst new energy vehicles brands in China up from number four when we announced the partnership in October ‘23. Now let's turn to inventories where we improve sequentially compared to the fourth quarter of 2024.
This is the first time since Q3 2021 when we have sequentially reduced total inventories and reflects the clear inventory discipline across all our segments. Between December ‘23 and March ‘24, we reduced stocks by 66,000 units driven by a decrease of 158,000 units of dealer stock, mainly in Europe, but with all regions contributing except for the Middle East and Africa where inventory expanded to underpin the region's exceptional growth. Looking forward inventory development will be in line -- aligned with the new launches and shipment evolution. I'd now like to provide some color on our outlook and financial guidance. With our full year ‘23 results, we highlighted the approaching and exciting new 24 product wave that I'm happy to confirm is fully on track.
This expanded and enhanced our product portfolio -- expanded and enhanced product portfolio fuels opportunity for a more positive year-over-year revenue comparison, as well as more positive AOI and industrial free cash flows as the year progresses. Particularly, so in the second half, which is why we are pleased to confirm all of our full-year financial guidance today. Let's start with revenues, where despite unevenness in many markets, we believe the full-year macro environment remains positive for improving revenue dynamics, especially as we move into the second half when most of our new product initiatives come online. Therefore, we expect second quarter revenues to improve sequentially with smaller year-over-year declines, and for the second half of the year to be well-positioned to deliver positive year-over-year top-line growth.
With respect to profitability, we remain fully committed to our double-digit AOI guidance for 2024, for the first half, we now expect a range of between 10% and 11% reflecting a large part in large part the softer first half, starting point on revenues, adverse regional mix, and an expectation of continued FX headwinds. As we think about the second half, we see opportunity to improve on that range driven in part by the upgraded product offer. Lastly, when it comes to industrial free cash flow, which is a calling card for Stellantis and a topic that we put, immense focus on timing of CapEx R&D and JV spend in ‘24 will be especially front half weighted to support the pending product transition. So, expect H1 industrial free cash flow to be visibly below last year's level.
Now let's finish up by turning our attention to two topics that I'm personally very excited about. The first is a concrete example of some of these significant product portfolio upgrades featuring the fully renewed ram line being put in place over the next 12 months. Our updated core 2025 Ram 1500 already hitting the market in the first half of ‘24, features a new turbocharged inline six powertrain, the hurricane engine offers 25% more power and torque than the outgoing V8, while enhancing efficiency to comply with US emission regulations. And later this year, we'll start producing the Ram Rev, a top tier BEV version built on the new Stellantis frame platform, which is ready to provide new performance benchmarks, especially when it comes to range within the BEV truck segment.
Following closely in 2025, the RAM Charger, a RAM extender electric vehicle with all the special performance characteristics of a BEV, plus a 700-mile range addressing long-distance customer needs and eliminating the challenges of low charging density areas. With these innovations, we're set to lead the light-duty pickup segment, offering the most advanced ice powertrain, a top-performing BEV and the first range extender electric vehicle, ensuring strong market competitiveness and pricing power. And I'd like to take a moment to provide you with some details about our upcoming June 13th Stellantis Investor Day to be held here in Auburn Hills, Michigan with simultaneous virtual participation facilitated via webcast. Carlos, myself, and group of our most prominent commercial and brand leaders will outline developments across our most important regions and functions.
We want to help you better understand how we see the industry evolving, how we're leveraging standout technology, our leading operational discipline, and other competitive advantages that distinguish ourselves further, and how we're building a powerful and productive capital discipline that help us maintain and maximize sustainable returns. For those of you who are able to attend in person, you'll get the chance to engage directly with many of our most senior leaders and experience many of our exciting and new upcoming product portfolio launches before they hit the market. So, before I open it up to Q&A, I'll just take a moment to recap what I've presented today. In Q1, we focused it on managing the product cycle transition and inventory's normalization.
We're delivering an important stabilization and improvements in our key commercial dynamics, such as market share, pricing and inventory levels, which put us in the best position to launch new products and expand the reach of our offering as we move forward in the year. And that product push itself is significant. It's being created on flexible platforms to be ready for different EV adoption scenarios with high agility to respond to a dynamic market, which will move us into a new phase of our story that will become even more clear in the second half of the year and beyond. Thanks for your attention. I'll now hand back to the operator for your question.
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