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IN the first sign of a business reversal across the car retailing industry, Eagers Automotive has announced that it will miss its profit expectations for the financial year as it absorbs the ongoing effects of COVID-19 on car production and logistics, the semiconductor shortage affecting deliveries, and lockdowns in China.

In a market update to shareholders at the company’s annual meeting and issued through the Australian Securities Exchange, Eagers’ CEO Keith Thornton said he expects the underlying profit before tax to be $183 million to $189 million fior the half-year ending June 30, 2022.

This compares with $214.8 million posted in the previous corresponding period. Eagers previously posted its 2021 calendar year financials showing underlying profit before tax of $401.8 million for the 12 months, up from $209.4 million for the 2020 year.

Mr Thornton said that “on a like-for-like basis, we expect a result for the first half of 2022 in the range of 12-15 per cent below that of 2021 after adjusting for the Daimler Truck divestment in 2021.

“This reduction is largely attributable to a similar reduction in new vehicles delivered over the same period,” he said.

He said the diminished profit expected this half year, based on the disrupted supply of new vehicles, failed to mask a market with strong demand for new cars.

“This has resulted in an increase in our record new-car order book of more than 25 per cent since December 31, 2021,” he said.

“Supporting these conditions, our new-car margins have remained in line with the very strong levels of 2021 while our financial performance remains materially above industry levels.”

But he said the volume of deliveries to customers had been hit by outside factors and this had led to the downgrade in profit expectations.

“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 and compounded by both the Ukraine conflict and China’s ongoing COVID-19 lockdowns.”

Mr Thornton was cautious about the outlook for the remainder of the calendar year, stating that the outlook for vehicle supply – and therefore the timing of vehicle deliveries to customers – remains “unclear”.

However, he said Eagers was “well positioned to deliver a strong second half performance subject to supply constraints easing.”

“As we continue to balance these changing market dynamics with the execution of our Next100 Strategy, we are actively pursuing opportunities aligned with our strategic priorities to provide accretive growth for our shareholders.”

He said the company remained “very confident” in the strength of the business that was supported by a “robust” balance sheet and the volume and gross profit reflected by the order book.

“However, the continued lack of transparency of new-vehicle supply and disruption to labour, parts supply, logistics and transport, mean we remain cautious regarding the timing of when deliveries will occur,” Mr Thornton said.

By Neil Dowling

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