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FCA releases its profits, global sales, and debt

by David Zatz on

Fiat Chrysler Automobiles announced their global first-quarter results today, and the news was good — record first-quarter profits good, with a 55% gain in adjusted net profits (from €671 million to €1,038 million. €1 currently equals $1.21; so adjusted first-quarter net profits were $1.26 billion.)

One roadblock was the 2019 Ram 1500 launch; according to CEO Sergio Marchionne, the Sterling Heights plant that builds it is still only at around “60% of cycle.” That has cost the company $300 million, according to the CEO.

FCA used its cash on hand to pay off €1.3 billion in maturing debt; that likely led both Standard & Poor’s and Moody’s to raise FCA’s credit rating (to BB+ and Ba2, respectively). Net debt now stands at €1.3 billion, and is still projected to be zeroed out by the end of the year — which will be handy if auto sales fall, as many say they will.

The Board of Directors authorized the spinoff of parts-maker Magneti Marelli, to free more capital for investment and reduce the cost of existing debt.

Unit sales went from 1.08 million to 1.15 million; joint venture sales (mainly in China) dropped from 67 million to 53 million. Combined shipments still grew by 5%, mostly due to growth in the Americas.

Net revenues fell by 2%, to €27.7 billion, but the company pointed out that this was largely due to exchange rate changes; holding exchange rates constant, revenues actually rose by 9%.

FCA confirmed its guidance for 2018 — a net profit of €5 billion, and adjusted earnings before interest and taxes of around €8.7 billion ($10.5 billion).

NORTH AMERICA

North American performance is still strong; sales fell somewhat due to drops in Canada and Mexico, and overall market share fell from 12.2% to 11.9%. However, retail market share — which plummeted  under Daimler — rose from 11.7% to 12.0%, and transaction prices went up.  Dealer inventories dropped from 83 to 81 days, still high but not quite as bad.

well-lit LED dealership

The company’s margin rose from 7.3% to 7.4%, though net revenues fell — again, due to exchange rates —from €17.1 billion to €16.4 billion. FCA reported that, in North America, better product mix raised EBIT by €887 million, and price increases (offset by higher incentives) raised it by another €340 million. That was offset by launch cost, higher product-content costs, and exchange rates.

OTHER REGIONS

Latin American sales rose from around 113,000 to 127,000 cars and trucks, but market share dropped from 12.2% to 11.9%. Inventories stayed steady at 35 days of supply. The net margin rose from -1.2% to +3.9%, as net revenues went from €1.7 billion to €1.9 billion. Jeep alone had a 20% market share in Brazil (in the SUV segment). Here, again, there were substantial revenue gains from a more favorable mix of vehicles — read “more expensive cars” — and higher volume.

The Asia-Pacific region was a collection of red ink, with market share dropping from 0.8% to 0.7%, joint-venture sales dropping (combined sales stayed steady), inventory growing from 73 to 91 days, and net revenues dropping from €666 million to €619 million. On the lighter side, the region is still showing a profit; and the company explained away higher inventories as supporting the right-hand-drive Jeep Compass. Some of the drop in profit is from launching Alfa Romeo.

European sales also fell, from 399,000 to 390,000 vehicles; inventories held steady at 62 days. Market share dropped from 7.0% to 6.7% for passenger cars, and rose from 10.8% to 11.3% for light commercial vehicles (e.g. Ducato). Net revenues were constant at €5.6 billion and adjusted EBIT margin stayed at 3.2%.

Maserati Levante sales took a hit; as a result, Maserati sales dropped in every region but Japan, where sales are fairly small regardless; the result was a drop from around 11,700 to around 930 sales.

The components sales kept the same net revenues (€2.5 billion), adjusted EBIT, and nearly the same margin.

Overall, it was a good quarter for FCA — right in line with Sergio Marchionne’s predictions, as usual, and a good omen for his goal of leaving FCA without any net debt at all by the end of this year.

 

 

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