Fiat Chrysler: Second Quarter Indicates Better Times

(FCAU) a positive overall financial performance for the second quarter of 2015. It earned a net profit of $333 million that was up 69% from last year's net profit of $197 million. Net revenue for the group increased 25% from $23.3 billion to $29.2 billion, while there was a slight reduction in net industrial debt which now stands at $8 billion.

The outstanding improvement in net profit and EBIT was led by a strong improvement in NAFTA margin from 4.9% last year to 7.7% this year. FIAT's worldwide sales rose 5% to 762,000 for the quarter, including a 6 % increase in U.S. retail sales to individual buyers.

Segment-wise performance

The NAFTA region was the best pick out of all the major regions of operations of Fiat.
Through the second quarter the industry saw sales growth of 4% in the US and 3% in Canada. Fiat Chrysler's shipments increased from 627,000 units to 677,000 units during the period while the actual sales were 5% higher at 682,000 units. The all-new Jeep Renegade and the all-new Chrysler 200 were behind this jump in volume sales and an increase in US market share to 12.4%.

The group more than doubled its adjusted EBIT. This vital indicator was driven by increased sales, better pricing and a strong US dollar, but partially negated by increased production cost for vehicle content enhancements. For the first six months of 2015, margin improved to 5.8% from 4.1% for the same period last year. The company has set a target of 5.5% to 6.0% profit margin for the full year 2015, which now seems quite achievable.

The group's second best hunting ground, the EMEA region, also returned good results. There was a jump from 286,000 units to 322,000 units in shipments for the second quarter. The company's passenger car market share for the region was up 0.3% from 6.1%, while for LCVs, it was 13%, same as last year's quarter. The adjusted EBIT for the region was € 57 million compared to break-even in the prior-year period. The company attributes this to increased volumes, cost efficiencies and favourable product mix which included the Fiat 500X and Jeep Renegade. But due to negative foreign currency transaction impact on imports from the NAFTA region, the margins were partially offset.

In the APAC region, the group does not have a very strong presence. But it managed to keep revenue flat compared to last year and earn some profit there despite a fall in sales volume. However, the adjusted EBIT fell by 57% in the region owing to lower volume sales, unfavourable net pricing and negative foreign exchange transaction effects for vehicle sales in Australia partially offset by a reduction in marketing costs. Also, the slowdown in the Chinese economy and its automobile market had its effect. In a bid to increase sales, automakers are forced to increase the incentives for dealers which ate into the company's profit.

The performance in the LATAM region was the most disappointing. The company shipped 138 thousand vehicles, a decrease of 32%. The company lost a lot of market share in Brazil and Argentina due to strong competition in the former and pricing pressures and continued import restrictions in the latter.

The reported loss, however, is misleading because it includes increased start-up costs for the Pernambuco plant and marketing spend for the Jeep Renegade launch. In the absence of these extraordinary costs, LATAM results would have been at break-even for the quarter. Still, such a steep fall in sales and this much loss of vital market share is alarming any day.


The second quarter was outstanding for Fiat since it performed well in its two main markets: NAFTA and EMEA. Driven by its strong performance in North American and a European recovery, the group has also raised its outlook for the year. Hence, Fiat Chrysler should continue doing well in the future.
Published on Sep 11, 2015
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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