PORSCHE will take an 800 million euros (S$1.1 billion) hit linked to revamping its lineup this year, further pinching the sports-car maker’s already disappointing profit margins.
Expenses tied to expanding the product portfolio with more combustion engine and plug-in hybrid models will drop return on sales to the 10 to 12 per cent range this year, Porsche said on Thursday (Feb 6). The manufacturer expects its margin for 2024 to end up at the lower end of its forecast range, or around 14 per cent.
Porsche was among the major automakers to pull back from transitioning to electric vehicles last year, citing underwhelming demand. Challenges with making the jump to EVs has cost the company dearly in China, where deliveries have dropped. Porsche disclosed earlier this month that it may oust both its chief financial officer and sales chief.
Last year’s profit margin is a letdown from an initial projection of 15 to 17 per cent. Porsche’s projection for this year also may not be well received, according to Michael Dean, a senior industry analyst at Bloomberg Intelligence.
“Headline guidance for 10 to 12 per cent in 2025 will disappoint,” Dean said in a note. Porsche’s guidance implies an adjusted margin in the 12 to 14 per cent range, below analysts’ average estimate for 14.2 per cent, he wrote.
Stephen Reitman, a Bernstein analyst with the equivalent of a hold rating on Porsche, said the “sharp deterioration” in the 2025 outlook is a “major concern.”
“Today’s short but consequential announcement would normally merit in short order a follow-up briefing call by management” to “further explain and reassure an inevitably febrile market,” Reitman wrote in a report. He said Porsche cannot wait until Mar 12, when it is scheduled to report earnings.
Porsche shares fell 27 per cent last year and have slumped since the Stuttgart, Germany-based company’s 2022 initial public offering. Its market capitalisation has halved from a high of 109.5 billion euros in May 2023. BLOOMBERG
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