Porsche cuts forecasts due to alloy shortage, shares fall

By Victoria Waldersee

(Reuters) -Porsche AG cut its sales and profit outlook on Tuesday due to an unexpected aluminium alloy supply shortage, sending the German company’s shares down 4% to the bottom of Frankfurt’s blue-chip index.

Flooding at an unspecified European contractor has hurt supply of aluminium alloy, the luxury sports car maker said, affecting production of all its models and possibly leading to shutdowns for one or more vehicle series.

Porsche said the alloy supplier, which it did not name, had declared force majeure in writing, meaning it was unable to meet its contractual obligations due to events outside its control.

Novelis, a subsidiary of Hindalco Industries and aluminium supplier to a joint venture co-owned by Porsche, said it had notified automotive customers of a force majeure event that had forced it to shut down its plant in late June.

The alloy shortage also impacted the supply chains of German premium carmakers BMW and Mercedes-Benz, but both were able to find alternative suppliers. Spokespeople for BMW and Mercedes-Benz declined to give further details.

Aluminium maker Constellium, which is U.S.-listed but headquartered in France, said it did not supply Porsche from its facility in Switzerland.

Separately, the company said in its earnings statement on Tuesday it did not know when it would restart production at its Valais facilities following the flooding in late June.

Norsk Hydro CEO Eivind Kallevik declined to comment when asked by Reuters whether the Norwegian aluminium producer could increase output to make up for the shortfall or was receiving enquiries from customers for more product.

All three companies name Porsche or firms affiliated to the automaker among their customers.

Car body components made of aluminium are used in all vehicle series manufactured by Porsche, and reliance on the supplier has exposed the company to particular risk.

The aluminium alloy shortage adds to other challenges for Porsche in recent months, including software issues, product delays, supply chain problems and a sales slump in China.

‘BIBLICAL FLOOD’ ERASES IPO GAINS

“It’s been a biblical flood that’s wiped away the gains from the IPO,” said Stephen Reitman of Bernstein Research.

He was referring to Porsche’s initial public offering in September 2022, when its shares surged to close at 82.50 euros in Germany’s second-biggest market debut. The shares were down 4.1% at 69.66 euros on Tuesday.

Bernstein analysts said the flooding occurred at a Swiss supplier, and would lead to the production loss of at least 10,000-17,400 vehicles in the second half of 2024.

At the high end, that figure is equivalent to over 11% of Porsche’s first-half deliveries.

Porsche SE, the holding firm of the Porsche and Piech families that control Volkswagen and holds a blocking minority in Porsche AG, confirmed its 2024 earnings forecast despite the alloy supplier’s warning.

RESULTS DUE ON WEDNESDAY

Porsche AG now expects sales between 39 billion and 40 billion euros ($44 billion) as a result of the flooding in the aluminium supplier’s production facility. It previously expected revenue between 40 billion and 42 billion euros.

The company said it was to be expected that the delays in the production and delivery of vehicles would not be fully compensated for in the rest of the year.

Porsche now sees a return on sales between 14% and 15% for the year, down from its previous expectation of 15% to 17%.

The company reports first-half results on Wednesday.

It faces muted demand in China, driving global deliveries down 7% in the first half of the year.

Porsche is also struggling with low electric vehicle sales this year. It watered down its EV ambitions on Monday, citing customer demand and developments in the sector.

($1 = 0.9183 euros)

(Reporting by Utkarsh Shetti, Kanjyik Ghosh, Andrey Sychev, Christoph Steitz, Nick Carey, Alexander Huebner and Jesus Calero; Editing by Christopher Cushing, Alexander Smith, Bernadette Baum and Emelia Sithole-Matarise)