Fiat Chrysler Swings to Profit Boosted by Maserati

Adjusted net profit jumped over three-fold to €740 million from €210 million

f1Fiat Chrysler Automobiles N.V. (NYSE: FCAU), the world’s seventh-largest automaker, announced its Q3 FY16 financial results on October 25th, 2016.

The London-based company designs, engineers, manufactures, distributes, and sells vehicles and components. The Company’s activities are carried out through six segments: four regional mass-market vehicle segments (NAFTA, LATAM, APAC, and EMEA), Maserati, and a global Components segment. The Company has operations in approximately 40 countries and sells its vehicles under the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, and Ram brands, and the SRT performance vehicle designation. In addition, the Company designs, engineers, manufactures, distributes, and sells luxury vehicles under the Maserati brand. The Company also operates in the components and production systems sectors under the Magneti Marelli, Teksid and Comau brands. Read more about Fiat Chrysler Automobiles’ financial results below.

Q3 FY16 financial highlights

During Q3 FY16, the Company’s total revenue remained flat at €29.2 billion versus the prior year’s quarter. Moreover, the Company clocked worldwide combined shipments of 1,123 thousand units, substantially in-line with the prior year, while Jeep shipments were up 3% Y-o-Y during the reporting quarter.

Source: FCA
Source: FCA

Surprisingly, the automaker swung to profits of €606 million during Q3 FY16 as its net income improved in three out of four global regions, compared to a loss of €387 million last year when the automaker took a massive one-time charge to cover the cost of future recalls and the cost of vehicles lost from explosions in a port in Tianjin, China. Adjusted net profit increased over threefold to €740 million from €210 million in the prior year period. During the reporting quarter, diluted EPS came in at €0.38 compared to €(0.25) in the year-ago period. Adjusted diluted EPS was higher at €0.47 versus €0.14 in the year-ago quarter.

During Q3 FY16, the Company’s adjusted EBIT jumped 29% to €1,500 million, with improvement in all segments except LATAM; EBIT was €1,341 million compared to €225 million in Q3 FY15. Net industrial debt rose to €1 billion from June 2016 mainly due to normal working capital seasonality. Market share in the U.S. increased to 12.5%, up 30 bps, and in Europe to 6.1%, up 40 bps; while FCA remained the leader in Brazil with 18.6% market share.

FCA’s profits improved even though its shipments of new cars and trucks dropped 1% to 1.12 million and the automaker recorded a €149 million charge to cover the cost of a planned recall. The company said it is embroiled in a lawsuit with a supplier related to the recall and believes the supplier bears responsibility.

The automaker’s profits were also benefited from Maserati, its Italian luxury brand. Maserati’s profits before interest and taxes soared to €103 million compared to just €12 million for the same period a year ago. Maserati’s profits increased mostly due to the launch of the Levante in Europe. The Levante is the luxury Italian brand’s first ever SUV. FCA’s CFO, Richard Palmer, said that the company shipped more than 5,000 Levante SUVs during the reporting quarter.

On November 2nd, 2016, the Company announced that its October 2016 sales dropped 24% to 2,622 units. However, Fiat’s sales for January-October 2016 grew 20% Y-o-Y to 27,721, helped by the new Spider, which sold 1,875 units for the period. The Company is faced with quality problems; Fiat’s ranked next to last in the new Consumer Reports Car Brand Reliability study of 29 brands. Its 500L was listed as one of the 10 least reliable cars, sending the stock plunging 6% during the day.

Source: FCA
Source: FCA

Segmental highlights

NAFTA: During Q3 FY16, this segment’s shipments decreased primarily due to planned reduction in Chrysler 200 and Dodge Dart volumes in connection with NAFTA capacity realignment plan. Net revenues decreased due to lower shipments, with higher fleet mix, partially offset by favorable vehicle mix. Adjusted EBIT increased due to positive net pricing (net of negative FX transaction impact from CAD and MXN), purchasing efficiencies and lower warranty costs, partially offset by lower revenues, increase in product costs for content enhancements and higher manufacturing costs. Adjusted EBIT excludes net charges of €149 million, primarily relating to estimated costs associated with a planned recall for which there is an ongoing litigation with a component supplier.

Source: FCA
Source: FCA

LATAM: During Q3 FY16, this segment’s shipments decreased due to tough market conditions in Brazil as a result of the continued macroeconomic weakness, partly offset by improvement in Argentina. Net revenues decreased due to lower shipments, partially offset by favorable vehicle mix mainly from the all-new Fiat Toro. Adjusted EBIT decreased as a result of higher input costs driven by inflation and foreign exchange effects. During Q3 FY16, FCA remained the market leader in Brazil with market share of 18.6%.

Source: FCA
Source: FCA

APAC: During Q3 FY16, this segment’s shipments fell due to transition to local Jeep production in China, through JV with GAC, while combined shipments (including JV produced units) jumped 69% to 61,000 units. Net revenues inched up primarily as a result of favorable vehicle mix in China and increased sales of components to the China JV, offsetting lower shipments. Adjusted EBIT increased mainly due to favorable mix on imported vehicles, lower net price due to incentives for completion of the sell-out of discontinued, and other imported vehicles and improved results from China JV. Jeep sales jumped 76% driven by ongoing transition to localized production in China.

Source: FCA
Source: FCA

EMEA: During Q3 FY16, this segment’s market share (EU28+EFTA) for passenger cars grew 40 bps to 6.1% (up 70 bps to 28.9% in Italy) and rose 30 bps to 11% for light commercial vehicles (LCVs) (up 70 bps to 45.2% in Italy). Passenger car shipments jumped 16% to 229,000 units and shipments of LCVs rose 24% to 66,000 units. During the reporting quarter, net revenues increased due to higher volumes and favorable vehicle mix mainly driven by all-new Fiat Tipo family. Adjusted EBIT was driven by higher net revenues, purchasing efficiencies, improved results from joint ventures and favorable FX, partially offset by higher advertising to support new product launches, as well as higher R&D and manufacturing costs.

Source: FCA
Source: FCA

Maserati: During Q3 FY16, this segment’s shipments grew on the back of the all-new Levante, partially offset by lower Ghibli shipments. The Company garnered over 18,000 global orders for Levante, reflecting strong demand in all regions. Meanwhile, the increase in net revenues were driven by higher volumes, positive net pricing, as well as favorable vehicle and market mix for the all-new Levante. Adjusted EBIT grew due to higher net revenues, partially offset by increase in industrial costs and commercial launch activities.

Source: FCA
Source: FCA

Components: During Q3 FY16, this segment’s net revenue increase reflects higher volumes and favorable mix at Magneti Marelli, partially offset by lower volumes at Comau. Adjusted EBIT increased due to higher net revenues, partially offset by higher industrial costs. Magneti Marelli non-captive net revenues grew 69%, in line with the year-ago period.

Source: FCA
Source: FCA

Outlook for full year FY16

FCA increased its profit outlook for FY16 and now expects to earn net revenues of over €112 billion. Adjusted EBIT has been raised to over €5.8 billion from the earlier guidance of €5.5 billion, and adjusted net profit has been raised to over €2.3 billion from the previous guidance of €2.0 billion for the year. Net industrial debt is forecasted to come in below €5.0 billion. The market outlook for the various regions is given below.

Source: FCA
Source: FCA

Stock Performance

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Fiat Chrysler Automobiles’ stock finished the day at $6.78, falling 6.35%, at the close on Wednesday, November 2nd, 2016, having vacillated between an intraday high of $7.01 and a low of $6.71 during the session. The stock’s trading volume was at 13,616,699 for the day.

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