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Fiat Chrysler Profit Rises 34% on Strong SUV Demand

By John Rosevear - Updated Apr 26, 2017 at 11:05AM

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A new Maserati SUV and strong demand for Jeeps and Alfas helped boost FCA's profitability in the U.S., Europe, and China.

Fiat Chrysler Automobiles N.V. (FCAU) reported net income of 641 million euros ($698 million) for the first quarter, up 34% from a year ago, on good results in Europe and improvements in product mix around the world. 

FCA's profit before interest and taxes (excluding special items) rose 11% to 1.54 billion euros ($1.67 billion), ahead of the 1.44 billion-euro average estimate among analysts surveyed by Bloomberg. 

FCA's shares jumped over 4% in early trading after the news was released.

FCA earnings: The raw numbers

All financial results are in billions of euros except as noted. As of April 26, 1 euro was equivalent to about $1.09.

Metric Q1 2017 Q1 2016  Change
Revenue 27.72 26.57  4% 
Shipments (millions of vehicles) 1.15 1.13  1% 
Adjusted EBIT 1.54 1.38  11% 
Adjusted EBIT margin 5.54% 5.19%   0.35 ppts
Net profit (millions of euros)  641  478  34% 

Data source: Fiat Chrysler Automobiles N.V. FCA uses the term "adjusted EBIT" as shorthand for "operating profit minus special items." Shipments include vehicles shipped by FCA's joint ventures with Chinese automakers. Ppts = percentage points. 

The nutshell summary: Why FCA's profit jumped

FCA's adjusted EBIT in the first quarter increased 156 million euros from a year ago. Two factors drove much of the gain: 

  • Strong sales of the new Levante SUV drove a big jump in profit for FCA's Maserati luxury brand.
  • Profit from Europe nearly doubled from a year ago thanks to new Alfa Romeo models and strong Fiat sales.

More broadly, SUVs were a big part of the story. Strong retail demand for FCA's Jeep, Alfa Romeo, and Maserati SUVs helped improve profitability in most of FCA's business units. 

A white Maserati Levante SUV on a dirt road.

Strong demand for the new Levante SUV drove a 91-million-euro increase in Maserati's profit. Image source: Fiat Chrysler Automobiles N.V.

First-quarter highlights from FCA's business units

  • Adjusted EBIT in North America rose about 1% to 1.24 billion euros despite a 6% drop in the number of vehicles sold. The sales drop came as FCA discontinued the lower-margin Dodge Dart and Chrysler 200 sedans and reduced its rental-fleet sales, which led to a modest improvement in margins. 
  • FCA's adjusted-EBIT margin in North America rose to 7.25% from 7.16% a year ago -- a small gain, but still short of fourth-quarter results for old Detroit rivals Ford Motor Company (F 3.14%) (9.7%) and General Motors (GM 4.16%) (8.4%). Ford and GM will both report first-quarter results later this week.  
  • Latin America swung to an adjusted-EBIT loss of 20 million euros from an 11 million euro profit a year ago. Sales were flat and revenue rose on favorable mix and pricing shifts -- but local inflation increased costs, wiping out profit. 
  • FCA is in the process of transitioning to localized Jeep production in China, reducing its imports (which are heavily taxed). That led to a drop in revenue from FCA's Asia Pacific region (which excludes results from FCA's Chinese joint ventures) but a jump in the region's adjusted EBIT (which includes equity income from the joint ventures) to 21 million euros from 12 million euros a year ago.
  • As noted above, Europe was a good story for FCA. Sales and revenue both rose 12%, while adjusted EBIT rose 85% to 178 million euros from 96 million euros a year ago. The new upscale Alfa Romeo Giulia and Stelvio models boosted sales volumes and profitability. 
  • FCA reports results for the Maserati luxury brand separately from its regional business units. Maserati sales jumped 89%, revenue rose 87%, and adjusted EBIT rose to 107 million euros from just 16 million euros a year ago. Sales were up in all regions thanks to the success of the new Levante -- Maserati's first-ever SUV. 
  • FCA's Components unit includes industry suppliers Magneti Marelli, Comau, and Teksid. The unit's adjusted EBIT rose 37% to 118 million euros on a 9% year-over-year increase in revenue, on higher sales volumes and reduced costs. 
A red Alfa Romeo Giulia Quadrifoglio sedan.

Demand for the new Alfa Romeo Giulia sedan and its SUV sibling, the Stelvio, helped FCA to a 82-milion-euro profit gain in Europe. Image source: Fiat Chrysler Automobiles N.V.

FCA's debt, liquidity, and one-time charges

FCA reports "net industrial debt" as a headline number, but that number is not its total debt. FCA's calculation of "net industrial debt" subtracts its cash on hand and debt attributable to its financial-services arm from the total debt number. 

FCA's net industrial debt rose to 5.1 billion euros as of March 31, from 4.6 billion euros at year-end, on what FCA said was a seasonal increase in the need for working capital. 

FCA's overall debt was 21.2 billion euros at quarter-end, down from 24 billion euros as of December 31. Against that, it had available liquidity (cash and credit lines) of 21.6 billion euros, down 2.2 billion euros from year-end. 

FCA's special items in the first quarter totaled about 30 million euros in charges, mostly attributable to restructuring in Latin America.

FCA reaffirmed its full-year guidance

FCA reaffirmed its previous guidance for the full year. For 2017, it still expects:

  • Revenue of between 115 and 120 billion euros.
  • Adjusted EBIT of more than 7 billion euros.
  • Net profit (excluding special items) of more than 3 billion euros.
  • Net industrial debt of less than 2.5 billion euros as of year-end.

John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool has a disclosure policy.

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