Good results could be the final conclusion of 2013-Q1 Fiat Group report. There are bad numbers (such as Europe’s situation), but generally speaking the group did well in the first quarter of this year considering some specific facts. It means that neither volume nor profits grew up but most of the reasons for this are related to projects or activities focused on generating more sales and cash in the coming months. I’ll try to make a short/easy but complete analysis of the report released by Fiat Spa in April 29th, adding some information about sales registrations in the most important markets.
Revenue and profits
The group sold fewer cars and therefore total revenue fell (because of a worse mix product/price). This doesn’t mean that the situation is getting bad for Fiat-Chrysler. In fact, is something that the company had already predicted based on many facts that together generated this tiny slump (-2%). Mainstream brands (Chrysler Group + Fiat Group Automobiles) delivered 1,017 million units in the whole world in the first 3 months of this year (VW Group sold 2,27 million). That number is 2% smaller than 2012-Q1. The revenues of whole group (Chrysler Group + FGA + Ferrari & Maserati + Components division), fell 2,3% to 19.757 million euros. In other words, including Ferrari and Maserati’s deliveries, the group was able to sold (revenue) 19.368 euros/car (last year the revenue was 19.784 euros/car). The reason for this fall is explained by fewer deliveries in NAFTA, EMEA, and LATAM. In the case of NAFTA, fewer deliveries don’t mean fewer sales, as the group decreased the production of some of its models to allow the introduction of new ones (the new Grand Cherokee). In EMEA region the fall on revenues (-3,5%) is explained by the reduction on deliveries (and final sales), and the war on prices in all European markets (continuous rebates deteriorates total revenues).
APAC was the region with the best performance in both, revenues and profits. Due to increasing demand, the group was able to sell (revenues) 968 million euros in the first 3 months of this year in Asia-Pacific region, up 36%. This was possible thanks to more units sold (+45%) coming mostly from China (+109%), and Australia (+65%). Operational Profits are up in APAC region but down in the overall result. Hence, total group’s profits are down 23% to 618 million euros, and EBIT is down 28%. The reasons for this fall are cited below:
- Fewer deliveries of key products to be updated in NAFTA and more industrial costs coming from the launch of the new Jeep Cherokee. NAFTA’s EBIT is down 36%. In other words, Chrysler spent more because of the start of production of the new Cherokee, and delivered fewer units of the Grand Cherokee because of the change on MY (to reduce inventories of the old generation).
- LATAM profits did also fall from 235 million euros in 2012-Q1 to 127 million in 2013-Q1. It happened because of higher industrial costs that exceeded higher volume sales. These costs are the result of the regular closure of the plant that didn’t take place in December (as always) but in February 2013 (I guess is summer vacations closure). Besides, FIASA (Fiat South America) is having some problems with imports from Mexico, and spent more in advertising campaigns.
- In EMEA EBIT continues to be negative but had an improvement compared to 2012-Q1. The region burnt 111 million euros as a consequence of collapse on demand (mainly Alfa Romeo and Lancia brands). But the cost reduction plan and the good performance of the Fiat 500L sales allowed the group to reduce loses from 170 million euros negative EBIT to -111 million euros in 2013-Q1.
- As it continues to be a small region for Fiat-Chrysler, APAC’s rise on EBIT wasn’t enough to offset the fall in other regions. The good result is due to better sales performance than the rise on commercial costs related to the expansion in this market. Car demand is so growing so fast that it offset the rising costs.
- Luxury and sporty brands were again one the most profitable division of the group. Ferrari’s EBIT jumped from 56 million euros in 2012-Q1 to 80 million in 2013-Q1. This is because of higher demand and higher revenue coming from licensing and personalization programs. Maserati didn’t do that well burning 4 million euros (one year ago it earned 16 million). More expenses related to the introduction of the new Quattroporte explain this fall.
Lower EBIT took to lower net profits to 31 million euros, against 262 million one year before (-88%: the fall is also explained by amendment on IAS19 accounting rule in which it is expected higher pension expense as part of ‘Employee Benefits’).
Total debt and liquidity
The company’s total debt had a tiny increase as a consequence on investments made by Fiat Group (Maserati’s plant). Chrysler reduced its debt. This change is based on 2012-Q4 figures. Liquidity, that includes credit lines, improved in the same period from 20,8 million euros in December 31st of 2012 to 21,3 million in March 31st 2013.
Good results coming from USA where sales increased 7,6% to 429.000 units. In Brazil, Fiat registrations are quite stable at 179.000 units, up 3%, a bit better than total market. In Italy things aren’t going as bad as before: FGA + Ferrari and Maserati reported sales of 103.000, down 9% (against -13% of total market). Fiat brand’s sales fell only 1,2%.
In Canada, the group leads the ranking with 58.000 units, up 4% (Fiat brand falls 23%), and got a record market share of 16,3%. Argentinian results are also good with 29.000 units delivered, and Fiat brand was the only major car maker to increase its sales. It is not the case of Mexico, where sales barely grew up (+0,6%), as Chrysler Group’s fall was somehow offset by Fiat brand’s increase (+40%).
It seems that the Fiat as a brand has already hit bottom rock: its sales are up 2% in France where the market fell 15%. The same happened in Spain: Fiat brand is up 2,3% in a market down 11%. In both markets, Alfa Romeo and Lancia registrations are extremely low and bad. In Germany, the whole group falls 14% against 13% for the whole market. In the UK, which is the only market in Europe not to face difficult times, total sales are up 7,4% and Fiat Group’s sales are up 4% as Fiat brand’s good performance (+14%) was overshadowed by the drop on Alfa Romeo, Chrysler and Jeep sales.