• Group revenues rise 16% in Q3
  • Company reports net profit of €25m
  •  Trading conditions are "stabilising"

Fiat has returned to profit in its third quarter, despite a fall in sales, and predicted an improvement in business for the rest of the year. However, the reversal in its fortunes was not enough to keep it out of the red for the full nine-month period.

The Italian automaker said group revenues for Q3 2009 totalled EUR12bn, a 15.9% decrease over the same period in 2008. The company said that the global economic slowdown continued to have a "significant impact on demand" for all its businesses.

However, it added that the level of decline in some markets was more contained than for the first half, where performance was particularly negative in the first quarter.

Group trading profit for the quarter was EUR308m, compared with EUR802m for the same period in 2008. Aggressive cost containment actions helped mitigate the effect of revenue declines and pushed trading margins up to 2.6%, a healthy improvement over the second quarter's 2.4%.

Net profit was EUR25m (EUR66m excluding unusual items), compared with EUR468m for Q3 2008.

For the first nine months of 2009, however, Fiat reported a loss before taxes of EUR248m (EUR2,266m in 2008), reflecting a significantly lower operating result and a decrease in investment income (down EUR161m), partially offset by lower net financial expense.

Group revenues fell 21.4% to EUR36.5bn.

For Q3 2009, Automobiles booked revenues down 1.4% to EUR6.5bn.

During the quarter, the division delivered 538,900 cars and light commercial vehicles, up 4.3% over the Q3 2008. In western Europe, deliveries increased 7.0% to 287,100 units, with strong volume growth in Italy (+13.1%), Germany (+20.5%) and the UK (+26.9%), partially offset by declines in Spain (-25.3%) and France (-8.6%).

Passenger car deliveries rose 10% to 464,300 units. Against an overall market increase of 7.5%, deliveries in western Europe rose 16.5% to 252,800 units. Passenger car deliveries increased 20.4% in Italy, 42.4% in the UK and 48.8% in Germany - with increases significantly outpacing market growth in those markets - but decreased in France (-4.6%) and Spain (-19.6%).

Light commercial vehicle sales fell 21.1% to 74,500 in Q3 2009. Western Europe deliveries were down 33.1% to 34,300 units.

"The group delivered results in the first nine months of 2009 in line with its internal expectations, with the first quarter being characterised by erratic declines in demand, and the second and third showing the full effect of the restructuring and cost containment efforts started in the latter part of 2008," a statement said.

"We expect an improvement in the remainder of the year, as trading conditions stabilise for most of our businesses. We confirm our view that the truck market and the construction equipment business will continue to suffer depressed demand for the whole year."

On the basis of year-to-date results and barring unforeseen systemic shifts in demand, the company said it was reaffirming its financial objectives. Global demand for its products will decline 20% compared to 2008 whilst group trading profit is expected to be over EUR1bn.

Looking ahead, Fiat said that it had undertaken a thorough review of the carrying value of some of its investments in platforms and architectures, especially as they relate to the automobiles business.

"The strategic alignment of this business with Chrysler will undoubtedly offer the opportunity for a significant realignment of the responsibilities for development of segment architectures between the two organisations. As a result of this exercise, the group may revisit the future viability of some of its past investments, necessitating the write-off, as unusual items, of these legacy investments," it said.

"While working on the achievement of our objectives, the Fiat Group will continue to implement its strategy of targeted alliances, in order to optimise capital commitments and reduce risks."

Discussing the Q3 results in a conference call with analysts, CEO Sergio Marchionne said Fiat expected to boost trading profit 50% to RUR1.5bn in 2010 from this year's target if Italy continued subsidies to buy cars, but still planned to stick to its tough cost control.

According to Reutersm he said he thought the auto business had permanently changed as a result of the collapse in demand that prompted governments to introduce incentives for private buyers.

He also said Fiat expected its alliance with Chrysler, of which it owns 20 percent, to produce changes in the volumes of cars produced by each company in different segments.

"There's a view out there ... which I happen to share that ... the actual trading conditions of this business have been permanently altered," Marchionne said.

"As a result, I think we will have to keep on focusing on the cost structure as hard as we have in 2009," he added.

"We're beginning to see the bottoming out of this volume decline ... the worst is passed and this organisation has realigned its cost structure to deal with this reality."