Fiat “rattled” investors on Tuesday with the news that the profit margin at US unit Chrysler remained static in the second quarter despite selling more cars.
Its share price tumbled as investors focused on the margin rather than a second-quarter trading profit that beat expectations and its reduced losses in Europe, Reuters reported.
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“Chrysler increased its sales volumes, but its profit margin on sales was flat (at 4.5%),” one analyst told the news agency. “That’s never great.”
The suspicion that Chrysler may be shipping more cars to dealers than it has sold – an old Detroit habit – seems to have spooked the market, the report said.
“Data for the US shows that Chrysler’s inventory days increased from 59 at Q1 to 67 at Q2,” Credit Suisse wrote in a report, rating Fiat “underperform”. “In our view, this raises questions over the second half of the year.”
Excluding Chrysler, Fiat posted a EUR246m euro ($301.2m) loss for the second quarter – underlining how tables have turned since Fiat rescued Chrysler after the US company’s 2009 bankruptcy.
Fiat shares closed down 4.4% on Tuesday (31 July), erasing Monday’s gains.
UBS autos analyst Philippe Houchois said that Monday’s enthusiasm for the stock had cooled because of “the lack of a positive surprise, plus a complicated earnings statement”.
Fiat’s trading loss narrowed to EUR138m from a loss of EUR207m in the first quarter.
However, that represented a hefty jump from the 87m euro loss in the same period last year, with the company’s domestic market hit by a series of government austerity measures aimed at fighting a deepening sovereign debt crisis.
Fiat group trading profit was EUR1.01bn, narrowly beating the EUR965m consensus forecast in the company’s own poll of analysts.
Net profit was EUR358m, slightly less than the EUR370m expected by the analysts. Net profit for the corresponding period last year, which included Chrysler only from June 2011, was EUR1.23bn, bolstered by a one-off EUR1.06bn revaluation of its Chrysler stake.
Net debt shrank slightly to EUR5.43bn, from EUR5.77bn at the end of the previous quarter.
