Stellantis profitability beats target in first year after merger

Stellantis logo displayed on a phone screen is seen with some of the company brands logos displayed in the background in this illustration photo taken in Krakow, Poland on December 7, 2021.

Jakub Porzycki | NurPhoto | Getty Images

Stellantis said the margin on its adjusted operating profit climbed to 11.8% in its debut year, above its target of around 10%, thanks to strong execution on synergies, which generated around 3.2 billion euros ($3.6 billion) in net cash benefits.

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

Tavares will next week present the group’s detailed business plan, just over a year after Stellantis was created through the merger of Fiat Chrysler and Peugeot maker PSA.

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

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

Chief Financial Officer Richard Palmer told reporters that cash synergies booked last year put the group ahead of schedule to reach 80% of its 5 billion euro cost saving runrate target by 2024.

He said raw material inflation would remain a problem for the whole 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 any significant direct exposure to Russia, which is being hit be international economic sanctions over 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 6 billion euros last year, proposed to pay out 3.3 billion euros in ordinary dividends, equal to 1.05 euros per share.

Tavares has so far mapped out a 30 billion euro 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 its European operations — side-stepping potential labor conflicts and pushing the company’s operating profit margin up to around 10%.

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