Fiat Chrysler Automobiles (NYSE:FCAU) reported on Feb. 7 that its fourth-quarter net income rose 61% from a year ago, to 1.29 billion euros ($1.47 billion), on a 6% increase in revenue.
Excluding one-time items, FCA earned 1.04 euros ($1.18) per share, up 49% from its year-ago result. For the full year, FCA earned 3.20 euros ($3.63) per share on 115.4 billion euros ($131 billion) in revenue, in line with Wall Street analysts' expectations.
2018 was a record year for FCA. But the guidance it provided for 2019 forecasts incremental improvements, at best.
FCA earnings: The raw numbers
All financial results are shown in euros. As of Feb. 7, 1 euro = $1.14.
|Metric||Q4 2018||Change vs. Q4 2017||Full-Year 2018||Change vs. 2017|
|Revenue||30.619 billion euros||6%||115.41 billion euros||4%|
|Adjusted earnings before interest and taxes (adjusted EBIT)||2.023 billion euros||7%||7.284 billion euros||3%|
|Adjusted EBIT margin||6.6%||Unchanged||6.3%||(0.1 ppts)|
|Net profit||1.293 billion euros||61%||3.632 billion euros||3%|
How FCA's business units performed
All of the profit numbers for FCA's regions and business units are presented as the company reports them, on an "adjusted EBIT" basis. "Adjusted EBIT" is earnings before interest and taxes, "adjusted" to eliminate the effects of one-time items.
- FCA's NAFTA (North America) unit earned 1.68 billion euros in the fourth quarter of 2018, up 24.5% from the fourth quarter of 2017. Higher sales volumes and improved pricing, driven largely by the Jeep brand and the all-new 2019 Ram 1500 pickup, more than offset the effects of higher commodity costs. The company's adjusted-EBIT margin in North America was 8.7%, up 0.7 percentage points from a year ago.
- For the full year, the NAFTA region earned 6.23 billion euros, up 19.2% from 2017, with a margin of 8.6%.
- The LATAM (Latin America) unit earned 101 million euros, nearly doubling its year-ago result. Higher sales volumes and pricing gains helped offset rising costs and exchange-rate pressures in a region where many of FCA's rivals have posted losses. LATAM's adjusted-EBIT margin was 4.6%, up 2.2 percentage points.
- For the full year, LATAM earned 359 million euros, up 138% from a year ago, with a margin of 4.4%.
- The APAC (Asia, Pacific, Africa, and China) unit lost 112 million euros, compared to a 2-million-euro loss in the year-ago quarter. Lower sales volumes and intense pressures on pricing in the weakening market for new vehicles in China are largely to blame here.
- For the full year, APAC lost 296 million euros, compared to a profit of 172 million euros in 2017.
- The EMEA (Europe, Middle East, and Africa) unit earned 61 million euros in the fourth quarter, down from 230 million euros in the year-ago period. Sales fell 11% year over year, and FCA's pricing came under heavy pressure. EMEA's adjusted-EBIT margin was just 1%, down 2.8 percentage points from the fourth quarter of 2017.
- For the full year, EMEA earned 406 million euros, down from a profit of 735 million euros in 2017. Its margin was 1.8%.
- Maserati, FCA's luxury brand, earned 48 million euros in the fourth quarter of 2018, down from 188 million euros a year ago. The story is simple: Global sales fell 32%, revenue fell 41.5%, and Maserati's margin slipped to 6.8% from 15.5% a year ago.
- For the full year, Maserati earned 151 million euros, versus a profit of 560 million euros in 2017. Its margin slipped to 5.7% from 13.8% in 2017.
FCA's cash now exceeds its debt
As of Dec. 31, 2018, FCA had 13.79 billion euros in cash and equivalents, and about 7.3 billion euros in available credit lines, for total industrial liquidity of 21.13 billion euros. ("Industrial" is FCA's term for financial figures related to its core auto business.) Against that, it had 11.9 billion euros of industrial debt, giving it "net industrial cash" of 1.87 billion euros.
Looking ahead: FCA's guidance for 2019
For 2019, the automaker currently expects:
- Adjusted EBIT greater than the 6.7 million euros it generated in 2018.
- An adjusted-EBIT margin better than 6.1%, its 2018 result.
- Adjusted diluted EPS greater than 2.70 euros (2018 result: 3.00 euros).
- Industrial free cash flow of greater than 1.5 billion euros (2018 result: 4.4 billion euros).
FCA expects continued strong performance in NAFTA and LATAM in 2019, with higher adjusted EBIT and margins versus its 2018 results. But it doesn't expect to see improvements in EMEA, China, and Maserati until the second half of 2019 at the earliest. It also expects lower free cash flow, as its capital expenditures will rise year over year as forecast in its 2018-2022 business plan.