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Losses at Aston Martin rose nearly 90 percent in the first three months of the year as the British carmaker suffered from a two-thirds drop in sports utility vehicle sales and higher costs to refinance its debt.
The company reported a first-quarter pre-tax loss of £138.8 million on Wednesday, compared with £74.2 million a year earlier, while revenue fell 10 percent to £267.7 million.
The company delivered 945 cars in the period, more than a quarter fewer than a year earlier, as the company halted production of certain models before launching new cars as part of a planned refresh of its lineup later in the year.
A decline in sales “is the plan and has always been the plan,” Chief Financial Officer Doug Lafferty said Wednesday.
Aston Martin is crippled by heavy debt, which the luxury car maker plans to pay off once it starts generating significant amounts of cash. In March, the company refinanced £1.15 billion of debt, which will reduce borrowing costs in the future. However, due to falling cash levels, total net debt rose to over £1bn at the end of the month, compared to £868m a year ago.
Shares fell 8 percent in early trading on Wednesday.
The company spent £80 million in the first three months of the year on financing costs related to changes in the US dollar exchange rate and charges for early repayment of some of the refinanced debt.
There was a cash outflow of £190.4m in the three months, compared to £118.3m a year earlier, partly due to a net interest payment of £42.6m.
The amount of cash Aston has access to has fallen to just over £395m from just under £461m a year ago, which includes the company more than tripling its revolving credit facility to £165.6m.
“This new facility provides the company with additional liquidity as it continues to accelerate its growth strategy,” Aston said on Wednesday.
The company had previously indicated it expected a weaker start to the year, but expected a wave of new car launches to help boost sales and profitability in the second half of the year.
The worse-than-expected figures show the scale of the challenge facing Aston’s new chief executive Adrian Hallmark, who was poached from Bentley by Volkswagen and will take over later this year.
Philippe Houchois, automotive analyst at Jefferies, said the company is going through a “painful transition” and expects a similar development in the coming quarter.
Barclays analyst Henning Cosman said the company needed “a pretty extreme hockey stick” in the second half of the year to achieve its targets.
Under chairman Lawrence Stroll, Aston has sought to rebalance supply and demand – something crucial for luxury companies – and invest in a new wave of models.
Stroll said the company is undergoing an “immense product transformation” with the launch of four new cars this year, which is “expected to result in strong financial results and positive free cash flow generation in the second half of the year and beyond.”
The 63 percent drop in SUV sales comes ahead of a revised version of its DBX model, which will feature a new interior and infotainment system and goes into production later this quarter. The modernization of the car’s interior was “in response to a lot of customer feedback,” added CFO Lafferty.
On Wednesday, the company, which previously pushed back the expected launch date for an electric car, announced it would launch a new V12 engine to power an upcoming high-end GT car.