Fiat post drop in operating profit in second quarter of 2014

Article by Christian Andrei, on August 1, 2014

Fiat posted a drop in earnings before interest and taxes (EBIT), including special items in the second quarter of 2014 to EUR961 million as weak results in Latin and North Americas dragged down strong sales at its luxury brands and its operations in Asia and Europe. Operating profit in the second quarter of 2013 was EUR1.07 billion.

The Italian carmaker saw its net profit in April-June 2014 slashed by over half from EUR435 million to just EUR 197 million, no thanks to a hike in tax charges with earnings in the United States that is currently subject to deferred taxation.

The results exclude those of Chrysler Group, which second-quarter figures will be published Aug. 11. Fiat suffered disappointing results in North America, having seen its operating profit drop 18 percent despite a 7-percent surge in revenues.

George Galliers, an analyst at ISI Group in London, told Reuters in an e-mailed note that a large part of Fiat’s miss came from North America, where the carmaker made less money even as revenue increased.

Rabih Freiha, an analyst at Exane BNP Paribas in London, said in an e-mailed report that Fiat’s lower profit in North America “undermines the whole bull story about margins catching up with” profitability at Ford and General Motors.

He noted that if it is pricing, this would be a very negative signal. Fiat, however, rose to almost a breakeven in its home region Europe, thanks to good demand for the Fiat 500 family, the new Fiat Ducato and Jeeps.

Fiat logged a 23-percent drop in sales in Latin America in the second quarter of 2014, larger than what analysts had expected of the impact of the strong euro and the end of car sales incentives in Brazil.

Fiat considers Brazil as its second-biggest market while Latin America accounts for around a quarter of its profits. Despite the brouhaha in those markets, Fiat still manage to grow its global sales to EUR23.3 billion in the first half of 2014 from EUR22.3 billion in the same period in 2013.

Fiat’s numbers were boosted by double-digit surges in Asia and its luxury brands like Ferrari and Maserati. Fiat’s net debt stood was EUR9.7 billion at the end of June.

Topics: fiat, profit

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