Stellantis beats profit target in first year after merger

Stellantis made a fast start in its first year after the merger of Fiat Chrysler and Peugeot maker PSA, with the world's No.4 carmaker reporting profitability and benefits from the combination both ahead of target.

The group said on Wednesday the margin on its adjusted operating profit was 11.8% in 2021, above its target of around 10%, thanks to strong progress on synergies, which generated around €3.2bn (roughly R54.13bn) in net cash benefits.

The carmaker's Milan-listed shares were up 5.7% at 1040 GMT.

“Record results prove that Stellantis is well positioned to deliver strong performance, even in the most uncertain market environments,” CEO Carlos Tavares said in a statement.

Tavares will next week present the group's detailed business plan.

Stellantis guided for a double-digit margin again this year. The pro forma figure for 2020 was 6.9%.

Margins in North America climbed to a record 16.3% last year.

Banca Intesa analyst Monica Bosio said 2021 results “materially” exceeded expectations and that guidance for 2022 was based on a prudent market outlook.

“While the current environment remains difficult and a further material jump in 2022 fundamentals looks more challenging given the starting base, we believe the group could continue to leverage on its strong synergies' execution,” she said in a note.

CFO Richard Palmer told reporters that cash synergies booked last year put the group ahead of schedule to reach 80% of its €5bn (roughly R85.4bn) cost saving runrate target by 2024.

He said raw material inflation would remain a problem for the industry this year, while the semiconductors shortage, which cost the group around 20% of its planned production in 2021, had peaked in the third quarter of last year.

He added Stellantis did not have a significant direct exposure to Russia, which is being hit be international economic sanctions over its actions in Ukraine.

“We have flexibility in production,” Palmer said. “We are confident we can manage the Russia crisis.”

The group, which generated an industrial free cash flow of over €6bn (roughly R102.4bn) last year, proposed to pay out €3.3bn (roughly R56.3bn) in ordinary dividends, equal to €1.05 per share.

Free cash flow is expected to be positive this year, it said.

Tavares has so far mapped out a €30bn (roughly R512.2bn) electrification strategy, and formed alliances with Amazon and iPhone assembler Foxconn to accelerate development of software and semiconductors for future connected vehicles.

He has also drawn up plans for five battery plants and cut deals with unions to keep streamlining European operations — sidestepping potential labour conflicts and boosting the company's operating profit margin.

Palmer said the group had no current plans to create separate entities for electric and combustion engine cars, as is being considered by rivals Renault and Ford.

“We just created a new company and that should be enough to start with as long as we manage complexity and diversity,” he said.

In a separate statement, Stellantis said it was paying out €1.9bn (roughly R32.4bn) in benefits to employees based on last year's results, up 70% on 2020.