Fiat Chrysler Automobiles: Profit Up 15%, Debt Still High

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Fiat Chrysler Automobiles (NYSE: FCAU) said its second-quarter operating profit rose 15% to 1.87 billion euros ($2.19 billion) on improved margins in North America and strong results for its luxury Maserati brand. But its still-high debt fell less than analysts had expected. 

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All financial numbers are shown in euros. As of July 27, 1 euro = about $1.17. 

FCA earnings: The raw numbers

Metric Q2 2017 Q2 2016 Change
Revenue 27.92 billion 27.89 billion 0%
Shipments (rounded to nearest thousand) 1,225,000 1,233,000 (0.6)%
Adjusted EBIT 1.867 billion 1.628 billion 14.7%
Net profit 1.155 billion 321 million  260%
Metric As of 6/30/2017 As of 12/31/2016
Debt 19.14 billion 24.05 billion
Available liquidity 19.95 billion 23.80 billion
Net industrial debt 4.23 billion 4.59 billion

FCA's second quarter: The nutshell summary

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FCA's overall shipments were down slightly from a year ago, but profit increased on a much-improved mix of products sold. Maserati shipments nearly doubled on strong sales of its new Levante SUV, driving big gains in profit and margin. In addition, FCA was able to raise its margin in North America to 8.4%, from 7.9% a year ago, after discontinuing lower-profit sedan models to focus on trucks, SUVs, and higher-profit performance vehicles.

FCA's net industrial debt, a widely watched number, fell to 4.2 billion euros ($4.9 billion) as of the end of the quarter. That was short of expectations: Wall Street analysts polled by Thomson Reuters had expected a larger decline, to 3.9 billion euros. 

How FCA's business units performed in the second quarter

All of the profit numbers for FCA's regions and business units are presented as FCA reports them, on an "adjusted EBIT" basis. "Adjusted EBIT" is earnings before interest and tax, "adjusted" to eliminate the effects of one-time items. 

  • Profit in FCA's NAFTA region fell 2% to 1.35 billion euros, on 16.08 billion euros in revenue (down 8%). Shipments fell 14% to about 576,000 vehicles, in part because of some factory shuffling and in part because of the discontinuance of three lower-profit models from a year ago (the Chrysler 200, Dodge Dart, and Jeep Patriot). NAFTA's adjusted-EBIT margin was 8.4%, up 0.5 percentage points from a year ago. 
  • Profit in FCA's Latin America (LATAM) region rose to 60 million euros from a break-even result a year ago. Revenue rose 37% to 2.01 billion euros, for a profit margin of 3%. Shipments rose 18% to about 132,000 vehicles on improving economic conditions in key markets (Brazil and Argentina).
  • Profit in FCA's APAC (Asia Pacific, Africa, and China) region rose 5% to 44 million euros, on a 2% increase in revenue (to 976 million euros). Shipments rose 43% to about 80,000, driven largely by a ramp-up in production of Jeeps in China. APAC's adjusted-EBIT margin was 4.5%, up 0.1 percentage point from a year ago.
  • Profit in FCA's EMEA (Europe, Middle East, and Africa) region rose 40% to 200 million euros. Revenue rose 4% to 6.01 billion euros on an 8% increase in shipments (to about 395,000). Margin of 3.3% was up 0.8 percentage points from a year ago.
  • Maserati's profit more than tripled to 152 million euros, as revenue rose 85% (to 1.07 billion euros) on a 91% increase in shipments (to about 13,200). Margin jumped to an impressive 14.2% from just 6.2% a year ago. The story here is simple: Strong global demand for the all-new Levante SUV drove the gains. 
  • FCA's Components unit includes suppliers Magneti Marelli, Comau, and Teksid. The unit earned 130 million euros, up 17%. Revenue increased 9% to 2.65 billion euros. Margin of 4.9% was up 0.3 percentage points from a year ago. Higher sales volumes across all three businesses accounted for the increase. 

Looking ahead: FCA's guidance

FCA confirmed its prior guidance for the full year. It still expects:

  • Net revenue of between 115 billion and 120 billion euro.
  • Adjusted EBIT of more than 7 billion euros.
  • Adjusted net profit of more than 3 billion euros.
  • Net industrial debt below 2.5 billion euros as of year-end.

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