S.P.A. RESULTS FOR THE THIRD QUARTER OF 2004
The Board of Directors of Fiat S.p.A. met in Turin under the chairmanship of
Luca Cordero di Montezemolo to review the Group’s consolidated results for the
third quarter and first nine months of 2004.
- Revenues from continuing operations up 9.4%; operating loss cut by two-thirds
- Seventh consecutive quarter of year-on-year operating result improvement
Higher working capital requirements due to seasonal factors and a reduction in
the amount of trade receivables sold result in negative net financial position
of 5.5 billion euros. Liquidity at a healthy 4.6 billion euros, after the
repayment of loans totaling 1.8 billion euros. In September, Fiat Auto adopted a
leaner, more efficient and more competitive organization.
Group revenues grew to 10.6 billion euros, an increase of about 1 billion euros
compared with the third quarter of 2003. This gain was made possible by positive
contributions from all automotive and components Sectors: Fiat Auto (+11%), CNH
(+10%), Iveco (+16%), Ferrari (+8%), Teksid (+13%) and Magneti Marelli (+20%).
Only Comau and Business Solutions bucked the trend, the former due to changes in
the scope of its operations and the latter as a result of the divestiture of
The operating loss contracted to 97 million euros in the third quarter of 2004,
a 206 million euro improvement compared to the same period last year (from –303
million euros to –97 million euros). Strong performances by Iveco and CNH, which
reported gains of 78 million euros and 65 million euros, respectively, are the
main reason for this improvement. Fiat Auto also contributed, cutting its loss
by 61 million euros compared with the third quarter of 2003.
The third quarter of 2004 is the seventh consecutive quarter in which the Group
has reported a year-over-year improvement in operating result.
The loss before taxes totaled 469 million euros, compared with income before
taxes of 348 million euros in the third quarter of 2003, when the Group recorded
a gain of about 1.3 billion euros on the sale of FiatAvio.
Group consolidated net loss widened to 554 million euros, a deterioration from
the third quarter of 2003, which benefited from the above-mentioned gain on the
sale of FiatAvio (781 million euros after taxes). Excluding this extraordinary
gain, consolidated net loss narrows by 378 million euros.
At September 30, 2004, the Group’s liquidity (cash and marketable securities)
amounted to 4.6 billion euros, following the repayment of loans totaling 1.8
billion euros. Gross indebtedness (financial payables and related accruals and
deferrals) totaled 20.6 billion euros. It decreased by about 1.8 billion euros
during the third quarter of 2004, due mainly to the repayment in July of the
outstanding bonds exchangeable into General Motors shares (1.4 billion euros).
Net indebtedness of the Group’s industrial operations totaled 7.3 billion euros.
The increase since June 30, 2004 was mainly due to higher working capital
requirements and a reduction in the amount of trade receivables sold.
At September 30, 2004, the Group had a negative net financial position of 5.5
billion euros, compared with a negative 4.3 billion euros at June 30, 2004. This
change primarily reflects higher cash uses, attributable in part to unfavorable
seasonal factors and a 700 million euro decrease in trade receivables sold.
Fiat Auto had revenues of 4.5 billion euros, up 11% over the third quarter of
2003. Higher unit sales account for this improvement. Fiat Auto’s operating loss
was 270 million euros, down from an operating loss of 331 million euros in the
same period last year. This 61 million euro decrease was made possible by
improved margins on new products and successful implementation of cost cutting
programs, offset in part by increases in R&D expenditures (48 million euros),
investments in the sales network (8 million euros) and provisions.
In the third quarter of 2004, Fiat Auto sold a total of 402,500 vehicles (+11%)
in challenging market conditions, characterized by lower new vehicle
registrations in Western Europe (-2.3%) and Poland (-24%). The impact of this
negative environment was partly offset by higher demand in Brazil (+17%), where
Fiat Auto increased sales by 36%.
During the third quarter of 2004, Fiat Auto’s market share was virtually
unchanged both in Italy (28%) and Europe as a whole (6.9%). Fiat Auto sold
1,332,200 vehicles in the first nine months of 2004, or 8.4% more than in the
same period last year. Volumes were up 3.3% in Western Europe, 6.1% in Poland
and more than 22% in Brazil.
During the third quarter, the Sector continued to strengthen its model lineup,
beginning distribution of the Lancia Musa and Fiat Panda 4x4 and unveiling the
Alfa Crosswagon Q4 and the Alfa Sportwagon Q4.
Agricultural and Construction Equipment
CNH booked revenues of 2.4 billion euros in the third quarter of 2004. The
increase of more than 10% over the same period last year was achieved despite
the negative impact of the appreciation of the euro versus the U.S. dollar.
In U.S. dollar terms (the Sector’s reporting currency), and avoiding currency
translation distortions, revenues grew by 14%. This improvement primarily
reflects buoyant sales of both agricultural and construction equipment,
particularly in the Americas, as well as higher product pricing.
At 90 million euros, CNH’s operating income more than tripled over the third
quarter of 2003. This sharp increase reflects significantly higher unit sales
and improved pricing in both of the Sector’s product segments, more than
offsetting the impact of higher steel prices.
The growth in sales of CNH’s agricultural equipment was roughly in line with the
expansion of global demand, which grew by 17%, due mainly to higher shipments in
the Americas. The construction equipment market was also positive (+14%), and
CNH performed well, thanks mainly to the success of its new models.
Iveco reported revenues of 2.1 billion euros in the third quarter of 2004, or
16% more than in the same period in 2003. This gain mainly reflects higher sales
volumes and improved pricing throughout Iveco’s product line.
At 76 million euros, the Sector’s operating income was up sharply over the third
quarter of 2003, when Iveco had a 2 million euro operating loss. This
improvement reflects the higher unit sales and prices mentioned above, together
with major cuts in operating costs.
In the third quarter of 2004, Iveco sold a total of 36,000 vehicles, or 16.6%
more than in the same period last year. In Western Europe, Iveco took advantage
of a sharp upturn in demand to boost shipments of its models. Iveco’s share of
the European market was unchanged at 11.2% in the third quarter of 2004, as a
slight decrease in the light vehicle segment was offset by gains in heavy
vehicles and particularly in the medium vehicle segment, where Iveco enjoys
Ferrari – Maserati
Ferrari – Maserati reported revenues of 322 million euros in the third quarter
of 2004, up 8.4% from the same period last year. Higher sales of Maserati
models, driven by the success of the Quattroporte, account for most of the
Reversing the performance of the previous quarter, the Sector earned operating
income of 2 million euros. However, this figure is lower than the amount
reported in the third quarter of 2003 due to the negative impact of currency
translations and higher R&D. The high points of the quarter were the
introduction of the F430 and the outstanding results of the F1 racing team
(Sixth Constructors Championship and Fifth Drivers Championship in a row).
Magneti Marelli reported revenues of 874 million euros. The 20% increase
compared with the third quarter of 2003 primarily reflects the consolidation of
the Electronic Systems business unit. If the contribution of these operations is
not counted, revenues show a gain of 5%, made possible by strong sales of diesel
components and new products in the Lighting line of business.
Operating income totaled 25 million euros. Restated on a comparable basis, the
increase amounts to 7 million euros, reflecting a rise in business volumes and
successful initiatives to cut production costs and overheads.
In September, the Sector sold 100% of its Midas operations to the Norauto Group.
The resulting net gain of 27 million euros was booked as extraordinary income in
the third quarter of 2004.
Comau’s revenues declined to 436 million euros. The main reason for the 19%
decrease compared with the third quarter of 2003 is the change in the scope of
operations following the transfer to Fiat Auto and Fiat-GM Powertrain of the
respective Dies and Service operations. At September 30, 2004, the order backlog
was 11% higher than at the beginning of the year.
Comau reported operating income of 4 million euros. The higher margins earned on
orders from European customers, which offset the impact of lower revenues,
account for this improvement over the third quarter of 2003, when the Sector
lost 1 million euros.
Teksid increased revenues by 13% to 215 million euros, thanks mainly to a
positive performance by the Cast Iron business unit, which took advantage of
rising demand in North America and Brazil to boost revenues by about 19%.
This improvement was achieved despite the negative impact of an unfavorable
euro/U.S. dollar exchange rate. The Sector’s operating income totaled 9 million
euros, more than double the amount earned in the third quarter of 2003. This
gain was made possible by higher sales volumes and cost-cutting programs, which
more than offset the negative impact of higher raw material prices and
unfavorable currency translation differences.
Business Solutions reported revenues of 356 million euros. The 18% decline
compared with the third quarter of 2003 is attributable mainly to a change in
the scope of the Sector’s operations (divestiture of Fiat Engineering). On a
comparable basis, revenues show a decrease of 5%. At 6 million euros, operating
income was 3 million euros less than in the third quarter of 2003. Based on a
comparable scope of operations, operating income would show an improvement of 2
million euros, made possible by efficiency gains.
Itedi booked revenues of 81 million euros in the third quarter of 2004, up more
than 5% over the same period in 2003. Higher advertising revenues at
Publikompass account for most of the increase. The implementation of
efficiency-boosting programs and lower paper costs enabled the Sector to halve
its operating loss to 1 million euros.
Results for the First Nine Months of 2004
Group revenues totaled 34.2 billion euros, up 7.1% compared with the first nine
months of 2003. This increase reflects higher sales volumes at most Sectors,
with gains of 8% for Fiat Auto, 7% for CNH, 11% for Iveco, 15% for Ferrari and
7% (on a comparable consolidation basis) for Magneti Marelli.
At 237 million euros, operating loss decreased by more than 600 million euros
compared with the first nine months of 2003. Higher operating income at CNH and
Iveco and a contraction of Fiat Auto’s operating loss account for this
Consolidated net loss of 1.2 billion euros was 252 million euros greater than
the net loss for the first nine months of 2003, when the Group earned net gains
totaling about 1.1 billion euros on the sale of Toro Assicurazioni, FiatAvio,
Fiat Auto’s European and Brazilian retail financing operations, Fraikin and a
controlling interest in IPI.
At September 30, 2004, the Group had a negative net financial position of 5.5
billion euros, compared with a negative 3 billion euros at December 31, 2003.
This change primarily reflects higher cash uses to fund higher working capital
requirements, a decrease in the value of trade receivables sold, and the net
loss of the period.
Outlook for the Balance of 2004
During the first nine months of 2004, the Group operated in an economic
environment in which the countries of the euro zone, and Italy in particular,
participated only to a very limited extent in the economic upturn. Not until the
closing months of the year did Italian manufacturers begin to transition from a
period of contraction to the phase of stabilization that precedes recovery.
Against this background, the Group has been making significant progress, due
primarily to the positive contributions of CNH and Iveco, two Sectors that
should end 2004 with a further improvement in profitability.
Fiat Auto adopted a leaner and more efficient organization on September 1, 2004
and is continuing to strengthen the management team that will lead its cultural
transformation and provide fresh momentum for its operations. The company, which
operates in a very difficult European environment characterized by strong price
competition, will end the fiscal year with a smaller operating loss than in
For all of 2004, the Group expects to reach its stated year-end goals of
attaining operating breakeven and reducing operating cash outflow. All Sectors
are committed to achieving of these objectives by focusing on increasing
technological innovation in their products, strengthening their sales networks
and, in the case of Fiat Auto, deploying a more efficient organization and
introducing new models.