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AS COST-of-living pressures impact on the Australian economy, Eagers Automotive has told shareholders that profits for the first six months of the year will be down 15 per cent on the same period last year.

But, while profits are forecast to fall, according to Eagers CEO in his annual general meeting address discussing the 2023 calendar year, revenue is up. 

Keith Thornton

 

He said revenue for the four months of 2024 was up 18.3 per cent and on track for a turnover of $11 billion for the calendar year.

But inflation and cost-of-living pressures, along with an increasingly competitive marketplace – triggered by a growth in the number of vehicle brands available in the market – was biting into company costs and into profits.

Mr Thornton said: “We have experienced some geographic weakness across our operations, particularly softness in New Zealand, which has continued into 2024 with the market down 10.4 per cent year to date, as well as softness in the Sydney and Newcastle markets relative to 2023.”

He also said that Eagers retail joint venture with Chinese car-maker BYD – which gives Eagers exclusivity to retailing the brand around Australia – was hit by “excess inventory clearance” which reduced profits. 

But he said that was temporary and that contributions to Eagers bottom line from the retail JV were expected to “strongly” rebound in the second half of 2024.

“Given the current market and business dynamics, and with a cautious lens on consumer sentiment, we expect to achieve an underlying trading performance for the first half of 2024 that is approximately 85 per cent of the underlying profit before tax for the first half of 2023,” Mr Thornton said in the AGM address.

Other sectors of Eagers expected to bolster the 2024 year results include a forecast for strong used-vehicle sales and contributions from the company’s Carlin and Easyauto123 businesses.

Its finance and insurance divisions are also on the up with Mr Thornton predicting “green shoots” after “a number of challenging years.”

The 2024 outlook delivered by Mr Thornton in his 2023 AGM address ricocheted off the share price, with Eagers stock trimmed 19 per cent in early trade to a low of $9.90. 

Media reports said that this hit the paper wealth of Eagers’ major shareholder, entrepreneur Nick Politis, whose 27.9 per cent stake took a $160 million fall in value.

But there was a silver lining. It also coincided with Mr Politis buying into Eagers as it hit its annual low, drawing in more share buyers and buoying the share price back to a day’s (Wednesday May 22) end of $10.36.

In closing his AGM address, Mr Thornton said Eagers remained “disciplined in our focus across our operations and optimistic regarding the outlook for the remainder of 2024 despite macro headwinds.”

“The new car market remains on track for another record year as our order bank continues to be delivered supporting both revenue and margins, while the underlying order write remains solid.

“In addition, the federal government’s recently announced extension to the Instant Asset Write Off in the 2024 budget and the implementation of the New Vehicle Emission Standard, legislated to begin from January 1, 2025, may provide further catalyst to second half trading.”

By Neil Dowling

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