Eagers Auto warns on profit as supply problems hit bottom line

IN FURTHER evidence havoc across global supply chains is constraining the delivery of new vehicles to Australia, the nation’s largest car yard owner Eagers Automotive has issued a profit warning.

The company warned shareholders at its annual meeting that interim profit will be down as much as 15 per cent from its target.

Poor supplies of semiconductors, which emerged early in the Covid-19 pandemic as a major bugbear for car makers and retailers, has persisted and stung Eagers as it scrambles to access new cars for its growing list of customers who are waiting months for delivery.

The war in Ukraine as well as lockdowns in China have also been included in a long list by Eagers – which has around 11 per cent of the car sales market – of problems that are getting between drivers and their new cars.

Eagers chief executive Keith Thornton said while demand for new cars was strong and its order book for new cars was up 25 per cent since Christmas, it would not be able to get as many cars as it had hoped to customers and this would dent interim earnings.

Eagers expects to record an underlying operating profit before tax from continuing operations for the six months ending June 30 in the range of $183m to $189m, as compared to $214.8m for the prior corresponding period on a like for like basis.

On a statutory basis, interim profit before tax from continuing operations is expected to be in the range of $225m to $240m, down from $267.4m last year.

Eagers chief executive

Keith Thornton blamed global supply chain issues for the profit warning.

“Despite the continuing strength of our underlying business, positive operational metrics and record order book, an anticipated reduction in the number of new vehicles delivered to customers in the first half of 2022 is expected to impact our half year financial performance,” he said.

“This is due to the supply of new vehicles being impacted by multiple global events, largely attributable to the ongoing effects of semiconductor shortages in the industry.”

For the 12 months to the end of December, Eagers reported a net profit of $456.8m and consolidated revenue from continuing operations of $8.7bn, marginally down on the prior period due to the divestment of its Daimler Trucks business in April 2021.