Despite clocking lower revenue and profit, American automaker General Motors (GM) posted better than expected results for the third quarter while also predicting that its earnings for the full year of 2021 would be at the high end of its earlier estimates.
The global semiconductor scarcity caused the company’s adjusted earnings per share to fall to $1.52 in the third quarter, compared to $2.83 for the same period a year ago.
A profit of 96 cents per share had been predicted by analysts for the quarter.
While the company also reported a drop in its revenue, at $26.8 billion in the most recent quarter, compared to $35.5 billion which it has posted for the same period the year before, the company also reported a drop in and profit to $2.4 billion, compared to $4.0 billion in the same quarter in the previous year.
GM also reported a drop in its quarterly adjusted earnings before interest and taxes to $2.9 billion compared to $5.3 billion, with a 9.0 per cent net margin for the quarter, down from 11.4 per cent in the same quarter a year ago.
In premarket trading, GM shares were down 1.4 per cent.
“We now believe GM’s full-year results will approach the high end of our guidance, which is for EBIT-adjusted in the range of $11.5 billion to $13.5 billion”, GM Chief Executive Mary Barra wrote in a letter to shareholders.
Rising prices of commodities and higher logistical expenses, as well as a fall in wholesale shipments to dealers due to a continued global chip shortage, were primarily responsible for the company not being able to meet expectations for its financial performance for the third quarter, the company said.
However, strong pricing on its full-size pickups and SUVs, as well as an agreement by supplier LG Electronics to cover the majority of the expected $2 billion in costs related to the recall of the Bolt EV and Bolt EUV, mitigated some of the negative impact to its business sin the quarter, according to the firm.
Compared to the same quarter a year ago, the company’s adjusted automotive free cash flow was lower by $4.4 billion, when it was $9.9 billion higher. The decline, according to GM, was due to the impact of work-in-process inventory, which consisted of vehicles that had been built but were lacking some chips.
“We expect to clear the majority of our work-in-process inventory but anticipate some inventory will remain at year end.” the company said.
(Adapted from MSN.com)