2016 profits up, but less strong than we had expected
26 Jan 17
FCA’s fully-consolidated delivery volume fell by 3% to 4.48m cars in 2016 (-4% in Q4) and including the volume of at-equity stakes it was down by 0.4% to 4.72m. Consolidated revenue reached €111bn (+0.4%). A better product mix combined with lower purchasing and warranty costs allowed the adjusted EBIT to increase by 26% to just above €6bn and adjusted net earnings by 47% to €2.5bn. Stated net earnings came in at €1.8bn compared to €334m released for 2015. Whereas revenue and EBIT numbers were in line with our projection, the bottom line is clearly lower than our projected €3.2bn. As long as final accounts are not out, we cannot judge whether this discrepancy is the consequence of sharply higher net financial expenses or considerably higher tax charges.
EPA has found a new Dieselgate victim
13 Jan 17
EPA has accused FCA of having implemented a cheating device into some 100,000 3L diesel engines sold in the USA. FCA rejects this claim and instead states that its ‘diesel engines are equipped with state-of-the-art emission control systems hardware’. FCA is looking forward to meeting representatives of the new administration to solve the problem.
Selling cars at discounts via Amazon
21 Nov 16
Fiat is starting to sell some of its cars via Amazon in Italy. It will begin with the Fiat 500, 500L and Panda, and these cars are believed to be sold with a 33% discount. Once the client has found his/her car on Amazon, he/she will be directed to a dealership that can deliver the car.
Management’s higher 2016 guidance still below our expectation
25 Oct 16
FCA reports unchanged revenue of slightly less than €27bn for Q3 and €81.3bn ytd. This was achieved although worldwide shipments were down by 4% to 1.07m vehicles in the last quarter, i.e. the group achieved some ASP improvement. Stated EBIT was up from €225m in Q3 15 to €1.34m and from €2.15bn to €3.71bn ytd. 9M net profit turned around from a loss of €103m to a profit of €1.4bn. Whereas the revenue numbers are only slightly below our expectation, the profit numbers and management’s new guidance suggest that our full-year projections are unlikely to be reached.
2016 targets raised and new 2018 projections unrealistically high
12 Sep 16
Management has raised its 2016 guidance and also increased its 2018 outlook. Revenue and EBIT numbers of €112bn and €5.5bn for the current year are very much in line with our expectations (€113.5bn and €5.4bn, respectively). However, management is overly optimistic for the next two years. By 2018, revenue is expected to reach €136bn (+10% p.a.) and EBIT between €8.7bn and €9.8bn (the middle yields an annual appreciation of 30%). At a time when the US market is likely to be close to its current peak, these projections seem to be wishful thinking. From 2015 to 2018, volume sales of the Jeep brand are expected to increase by 17% annually (from 1.24m units to 2.0m) with the strongest growth rates of some 70% in APAC and LatAm and 30% in EMEA. Besides the American plants, FCA intends to also produce these SUVs in China (two plants) and Italy. The Jeep brand alone cannot contribute sufficiently to the above 2018 revenue number. Other large-volume brands (like Fiat) need to increase their production and sales numbers as well, whereas the Chrysler brand is likely to suffer from the US consumers’ reluctance to buy sedans. Although the group intends to present numerous new models, capex (including capitalised R&D) is expected to remain unchanged at €8.5-9.0bn from 2016 to 2018. This plan, according to management, includes spending to support the development of advanced technologies and to meet regulatory compliance requirements. In fact, as revenue is projected to increase sharply, capex as a percentage of net revenues is expected to decline. Management argues that this is in line with the industry average. Our current projections for the auto industry (including suppliers) see capex (as a percentage of revenue) rising from just below 8% in 2015 to 8.3% by 2018. As a result of the above, management expects net industrial liquidity to turn around from net debt of €5.0bn at the end of 2015 to net cash of €4.0-5.0bn at the end of 2018. Conclusion: we find FCA’s new 2018 targets as being very ambitious indeed. In fact, the expected revenue growth numbers do not match capex projections and legal requirements to fulfill emission requirements. As a consequence, we do not see net liquidity turning around by some €10bn within such a short period of time.
Good earnings numbers in Q1 16
26 Apr 16
On an adjusted basis, i.e. excluding Ferrari, FCA’s deliveries fell by slightly less than 1% to 1,086k vehicles. As the ASPs were, except for EMEA, up in all regions, revenue increased by 3% to €26.6bn. This translated into EBIT of €1.31bn (+88%) and net profit of €478m (from €27m in Q1 15). While the volume and the revenue numbers both fell short of our projections, earnings were higher.
Net profit from continuing operations -40% in Q4 and -74% in 2015
27 Jan 16
FCA’s headline numbers (i.e. number of shipments unchanged at 4.6m and revenue +18% to €113bn) were not much different from our projections. However, Automotive revenue fell by 1.6% to €27.7bn in Q4 15 and, as shipments were only down by 0.6% to just below 1.21m, the ASP fell by 1.1% to €22,898. For the full-year, the ASP is up by 14% to €22,434.
Management’s very ambitious but unrealistic plan for 2018
04 Dec 15
Within the next three years, and based on our current 2015 projections, FCA intends to increase its annual volume by some 50% to 7m vehicles, revenue by 16% to €132bn, and EBIT by some 100% to a good €9bn. Based on management’s latest 2015 guidance the respective growth rates are c. 45%, 20%, and a good 100%. Management intends to achieve this by executing its premium strategy and by moving away from the European mass market. Simultaneously, the globalisation and localisation of the Jeep brand is in focus. Another focus is on Alfa Romeo, which is seeing its sales numbers falling sharply year after year. Management had promised before that this will change, but nothing has happened up to now.
Adjusted profits clearly below our expectations
28 Oct 15
FCA’s worldwide shipments were up by 0.3% to 3.4m units in 9M15, although the US market continues booming and Europe is recovering. The euro weakness, the company’s reporting currency, allowed revenue to increase by 20% to just above €83bn while EBIT was up by 16% to €2.5bn. However, net profit is now down by 41% to a mediocre €126m as management decided to take care of ‘the current regulatory and recall environment’. This forced it to book an after-tax amount of €602m to provisions.
Ferrari lists at €5.30 per FCA share
25 Oct 15
FCA has sold a 10% stake in Ferrari for US$980m. As a result, 10% of the shares are now listed, 10% are controlled by the Ferrari family, and the remaining 80%, which are currently owned by FCA, will be passed to FCA’s shareholders at a later stage. As a result, the producer of luxury sports vehicles will not receive a single dime but FCA has received almost €900m of cash.
FCA and UAW have reached a pay deal
16 Sep 15
The new contract runs for four years, but, apart from this, no further details have been released. The UAW leadership and the members still have to approve the final outcome. Statements suggest that FCA’s disproportionately high share of tear-two employees (c. 45% vs. 28% at GM and 20% at Ford) will be reduced over time. This indicates that the company’s costs will rise strongly in the next few years.
Euro as reporting currency has helped considerably
30 Jul 15
FCA’s passenger car shipments fell by 0.3% to 2.29m vehicles in H1 15. However, as the ASP was up by 27% to €22,934, automotive revenue increased by 27% to €52.5bn and consolidated turnover by 22% to €55.6bn. This allowed the group to increase EBIT by 74% to €2.14bn and net profit from €24m in H1 14 to €425m. All former numbers are higher than we had expected while net profit falls almost €200m short. One reason is a considerably higher than expected tax rate, but for further details we still wait for the full H1 release.
Ferrari disposal coming later than expected?
04 Jul 15
Media speculations suggest that Ferrari is worth €10bn whereas we believe that half of this is more realistic. Management intends to sell 10% of Ferrari’s shares in the market while FCA currently controls 90% of Ferrari. Subsequent to this, FCA’s shares are to be split into FCA shares and Ferrari shares, i.e. current shareholders will eventually end up with two separately listed equities. Assuming the above assumption of a €10bn value for Ferrari is correct, the remaining FCA activities are worth some €7bn or €5 per share. As this is an extremely low number, speculation suggest that the disposal might not come in the immediate future.