Fiat Auto has swung from a trading loss of EUR88m a year ago to a trading profit of EUR88m in the second quarter of 2006. The truck sector doubled its profit to EUR163m, from EUR82m in Q2 2005.
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The improvement in the automobiles sector was the prime reason parent Fiat Group revenues were up 12.9% year on year to EUR13.6bn in Q2 2006.
Automobiles revenues of EUR6.6bn were up almost 19% from Q2 2005 with Fiat Auto revenues up 20.8% and Ferrari up 9.3%.
Trucks revenue climbed 5.2% to EUR2.3bn.
Group trading profit was EUR659m, up significantly from EUR360m in Q2 2005. The group achieved a trading margin of 4.8%.
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By GlobalDataHowever, group operating income fell to EUR659m from EUR716m in Q2 2005.
Last year’s results included unusual income of EUR356m – mostly a portion of the General Motors settlement following the end of the various joint ventures. Excluding the impact of these items, operating income in Q2 2006 increased by EUR299m.
In Q2 2006, income before taxes totalled EUR542m, up from EUR473m in the same period of 2005. Net of unusual items, income before taxes improved by EUR425m, reflecting higher operating income of EUR299m, lower net financial expenses of EUR74m and improvement in investment income of EUR52m.
Higher Automobiles sales helped raise Fiat Group revenues to 14.7% to EUR26.2bn in the first half of 2006, compared with H1 2005.
Fiat Auto trading profit was EUR145m compared with a loss of 217m the previous year.
Group trading profit more than doubled to EUR982m, from EUR407m, largely due to the improvements at Automobiles. Trucks’ trading profit also improved sharply, reaching EUR233m from EUR130m in 2005.
The group ended H1 2006 with an operating income of EUR982m, compared with EUR1,445m in H1 2005, which included unusual income of EUR1,134m following the termination of the General Motors JVs and other one-off expenses totaling EUR1,038m. Excluding these items, operating income would have increased EUR575m.
On a like-for-like basis H1 2006 net income improved by EUR 732m.
Automobiles
Volume increases in Q2 2006 boosted revenues to EUR6.6bn, up 18.9% from Q2 2005. Fiat Auto (Fiat, Alfa Romeo, Lancia, and Fiat Veicoli Commerciali) had revenues of EUR6.0bn, up 20.8% from Q2 2005.
Fiat said the result reflected good customer response to new models, with the Grande Punto in the lead. Fiat Auto delivered 515,800 vehicles, 19.2% more than in Q2 2005.
In Western Europe (347,400 units delivered), growth was 27.2%, in sharp contrast with overall market demand, which contracted by 0.7% during the period. In Italy, the increase in unit sales was 34%, more than five times than the growth in demand (+6%). Sales performance was also strong in other European countries, with deliveries up in all markets (UK +51.1%; Germany +20.1%; France +7.1%; Spain +1.5%), despite soft market demand (UK – 4.0%; France -3%; Germany -2.0%).
Fiat Auto sales in Brazil increased 3.8% to 110,000 units, in line with the rise in demand (+3.9%). In Poland, where market demand was down 3.9%, Fiat Auto deliveries rose by 14.2%.
The market share of Fiat Auto in Western Europe improved by 1.6 percentage points
to 7.6%. In Italy, the improvement was even higher, as market share rose by 3.7 percentage points to 30.7%. Fiat Auto’s share of the Brazilian car market remained stable (25%) and rose to 11.1% in Poland (+1.5 percentage points).
Sales of commercial vehicles also increased in Q2 2006, totalling 87,800 units (+13.1%), of which 59,800 in Western Europe (+18.1%), where demand rose by just 1%. Consequently, market share rose by 1.3 percentage points to 12.6%.
Automobiles had a trading profit of EUR134m in Q2 2006, compared with a trading loss of EUR72m in the same period of 2005. Trading margin came in at 2%, at the lower range of the mid-term target of 2-4%. The main driver of this shift in the quarter was Fiat Auto, which had a trading profit of EUR88m, against a loss of EUR88m in Q2 2005. Higher volumes, a better product mix following the introduction of new models, containment of governance costs, net of the advertising costs for launching the new models, contributed to the strong improvement.
In H1 2006, Automobiles had revenues of EUR12.7bn, up 21% from H1 2005.
Fiat Auto closed the period with revenues of EUR11.8bn, up 22.2% driven by the sharp increase in volume resulting from the success of new models.
Automobiles generated a trading profit of EUR183m (trading margin of 1.4%), against a trading loss of EUR238m in H1 2005.
Fiat Auto had a trading profit of EUR145m, in sharp contrast to the trading loss of EUR217m recorded in H1 2005.
In Q2 2006, Maserati had revenues of EUR148m, down 11.4% from the same period of 2005 which had benefited from additional sales of the special MC 12 series.
In Q2 2006 the trading loss of Maserati was EUR7m, a reduction of over two-thirds from the loss posted in Q2 2005 (EUR24m). The improvement mainly stems from cost efficiency gains.
Maserati had revenues of EUR269m in H1, down 9.1% from H1 2005. Its trading loss was EUR26m, halved over H1 2005. A total of 3,024 cars were delivered during the first half of the year, 3.8% less than in H1 2005.
Ferrari had revenues of EUR389m in Q2 2006, up 9.3% from Q2 2005. This increase is largely attributable to sales of the special FXX series and improved product mix. Trading profit during the period was EUR53m, compared with EUR40m in the same period of 2005. Improved product mix and efficiency gains contributed to this increase.
In H1 2006, Ferrari had revenues of EUR706m (+16.7% from H1 2005). Deliveries to the dealer network during the period totalled 2,749 units, up 4.8% from 2005.
Trading profit of Ferrari doubled to EUR64m in H1 2006, from EUR32m in H1 2005.
Trucks and commercial vehicles
Iveco closed Q2 2006 with revenues of EUR2.3bn, up 5.2% from Q2 2005. The improvement reflects higher sales volume (+3%), an improved product and market mix, and higher pricing.
In Q2 2006, Iveco delivered a total of 47,500 vehicles, including 5,600 vehicles with a buy-back commitment, thereby realizing growth of 3% from Q2 2005.
Iveco’s trading profit in Q2 2006 was EUR163m, double the amount reported in Q2 2005. This sharp increase was attributable to higher volume, improved product and market mix and pricing, and the streamlining of product and governance costs. Trading margins are now 7.1%, up significantly from last year’s 3.8%.
H1 2006 revenues totalled EUR4.4bn in, up 5.1% from H1 2005.
Iveco’s trading profit in H1 2006 was EUR233m (trading margins of 5.3%), up 79.2% from H1 2005.
Fiat Powertrain Technologies (FPT) had revenues of EUR1.6bn in Q2 2006.
Trading profit was EUR52m (3.3% trading margins), up from EUR41m in Q2 2005.
A Banca IMI analyst recently told just-auto that Fiat Auto’s financial turnaround will peak this year and slow thereafter.
Sabine Blümel said Fiat Auto’s strong financial performance this year is being boosted by the positive impact of key model introductions, most notably the Grande Punto.
“We believe that Fiat Auto is well placed to beat management’s original target of selling 360,000 Grande Puntos in 2006 in view of the fact that 88,000 units were sold in the first quarter despite the fact that the model was not fully available in all European markets,” Blümel said.
“Marchionne’s 2006 targets look cautious and we are forecasting an EUR250m trading profit – a 1% margin – for Fiat Auto this year, which compares with a EUR281m loss in 2005.”
“But growth in Fiat Auto trading profit is forecast to slow considerably in 2007 and 2008 due to limited cost cutting opportunities, a narrow product portfolio, limited geographic reach and the effects of increased competitive pressures in the European marketplace.”
“New model introductions planned by Fiat in 2007 and 2008 will have a less beneficial impact on profitability than the Grande Punto has,” Blümel noted.
“For example, Fiat’s future C-segment model, called Bravo, which will replace the Stilo in late 2006/early 2007 has a low volume target of just 120,000 sales a year, reflecting Fiat management’s own realistic assessment of Fiat’s poor brand image which lacks credibility outside of small cars.”
Banca IMI is forecasting Fiat Auto trading profit in 2007 at EUR420m and EUR600m in 2008.
