Stellantis NV Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Top Line Performance: Shipments of 1.15 million units were down 20% Y/Y, revenues €33B down 27% due to mix, pricing actions in North America, and foreign exchange headwinds.
• Inventory Reduction: Group inventories reduced by 70,000 units in Q3. US dealer stock targeted to 330,000 by end of November, with a line of sight to achieve 100,000 reduction by November.
• Product Wave: Generational new product wave to reduce platform complexity, provide multi-energy flexibility. Frictions in implementation due to factory retooling and launch delays for quality standards.
• Leapmotor Partnership: European launch of Leapmotor products, with plans for IAP, Middle East, and South America launches. Increasing nameplates offered in Europe by end of 2025.
• New Products: Citroën C3 and eC3 launched with a healthy order book; Peugeot 3008 and E-3008 on STLA Medium platform, setting new EV performance standards.

Segment Performance

• North America: Shipments declined 36% or 170,000 units. Nearly 50,000 of the decrease was due to nameplates on hiatus pending new launches, and 80,000 due to inventory normalization. Pricing was materially negative due to enlarged incentives.
• Europe: Shipments declined 17% or 103,000 units. This was mostly due to a temporary gap in the B segment lineup for high-volume nameplates. However, success with new fee segment offers like the Peugeot 3008 created a favorable Q3 mix element.
• Middle East and Africa: Consolidated shipments declined 26% or 27,000 units. Majority of decline in Algeria due to import restrictions. Revenues fell 37% mainly due to FX-related headwinds and inflation in Turkey.
• South America: Revenues were down 2% as a 14% increase in shipments and parts/services revenue were offset by foreign exchange translation impacts, primarily from the Brazilian real.
• China, IAP, Maserati: China and IAP shipments down 30% due to competitive pressures. Maserati shipments declined 3,200 units due to lower Grecale SUV volumes and retirements of three products.

Guidance

• Full year AOI margins projected to be between 5.5% and 7%.
• Industrial free cash flow expected to be negative €5 billion to negative €10 billion. Guidance reiterated after adjusting for operational costs and delayed product launches.

Risks

• Operational Delays: Product launches delayed due to factory retooling and quality issues during the transition to new platforms.
• Inventory and Pricing Headwinds: Mix, pricing actions in North America, and foreign exchange fluctuations impacting revenues.
• Market Competition: Intense competition in China and other regions affecting shipments and market share.

Q: George Galliers asked about the North America inventory target and market share.

A: Doug Ostermann stated they are working on normalizing inventory and sales effectiveness, with early signs of progress in market share.

Q: Jose Asumendi inquired about pricing processes and dividend policy.

A: Doug Ostermann discussed working across the sales funnel, MSRP adjustments, and noted the strong balance sheet supports the dividend policy.

Q: Thomas Besson asked about guidance and product timelines.

A: Doug Ostermann said he's not narrowing guidance yet, and discussed key product launches like Dodge Charger Daytona and Cherokee successor in 2025.

Q: Patrick Hummel questioned US EV mix profitability and Europe CO2 strategy.

A: Doug Ostermann talked about EV profitability goals and Europe's BEV push due to regulatory pressures.

Q: Bruno Dossena asked about pricing strategy and free cash flow.

A: Doug Ostermann mentioned working on sales momentum and highlighted the importance of affordability and working capital management.

Q: Philippe Houchois inquired about captive finance and working capital.

A: Doug Ostermann spoke about the benefits of a captive finance organization and progress on working capital reduction.

Q: Stephen Reitman asked about feedback loops and dealer meetings.

A: Doug Ostermann noted he's looking to engage with dealers and discussed inventory quality and dealer support.

Q: Michael Jacks asked about US-Mexico-Canada agreement impacts.

A: Doug Ostermann said the company has flexibility to adapt to policy changes due to North American plant locations and multi-energy platforms.