By Nora Naughton
Fiat Chrysler Automobiles NV posted record operating profits in
the third-quarter, riding a surge in demand for expensive pickups
and a rebound in the U.S. auto market, where dealers are straining
to keep inventories in stock.
The Italian-American auto maker reported net profit of EUR1.2
billion ($1.4 billion) for the third-quarter Wednesday, compared
with a EUR179 million ($200 million) loss a year ago, as many of
the company's plants resumed production this summer and buyers
began returning to showrooms after widespread pandemic-related
shutdowns earlier in the year.
Global operating profits of EUR2.3 billion ($2.7 billion), or
EUR0.97 ($1.14) adjusted earnings per share, were both improvements
from the third-quarter last year. The earnings results handily beat
analysts' expectations of $0.44 a share.
Still, shares were down nearly 3% in morning trading, falling
slightly more than the broader market.
Jefferies analyst Philippe Houchois called Fiat Chrysler's
results "impressive" but said the shares likely came under pressure
because of broader concerns about escalating Covid-19 cases in
Europe, which are raising the risk of factory closures.
"I think the concern is over a second wave," he said. Shares of
European auto makers also were off sharply, including Volkswagen
AG, down 5% in afternoon trading, and Renault SA, which fell
7%.
Fiat Chrysler reinstated its full-year guidance after suspending
it earlier this year due to pandemic challenges, saying it will now
earn an operating profit before interest and taxes between $3.5
billion and $4.1 billion.
That's down from its earlier forecast of up to $8.2 billion for
2020 but still a sign of confidence the company can continue to
improve results, barring any further virus-related
complications.
"This was a remarkable quarter for our group despite the
continuing effects of Covid-19," said Chief Executive Mike Manley
on the company's earnings call. "While the last quarter of the year
will have its own set of challenges, we believe we're going to have
a strong finish to the year."
North America shined in the third-quarter, delivering the bulk
of the company's operating profits and helping to offset
money-losing operations in Europe and Asia, and from the troubled
Maserati brand.
The better-than-expected results help give Fiat Chrysler some
momentum as it presses forward on its merger with France's PSA
Group, a tie-up that would create one of the world's largest auto
makers.
Fiat Chrysler said the company is on track to complete the
merger by the end of first quarter 2021.
The company earlier this year implemented several cost-cutting
measures, including suspending its dividend payout, to help
preserve cash for both the merger and to help weather the Covid-19
crisis.
Aiding Fiat Chrysler's third-quarter results was the U.S. auto
market's turnaround in recent months. Demand for new vehicle has
returned faster than expected leaving many auto makers scrambling
to fulfill dealer orders, and U.S. auto sales grew in September for
the first time since before the pandemic hit.
For Fiat Chrysler, in particular, a resurgence in truck sales in
North America has helped further elevate the Ram brand, long one of
its most profitable divisions.
In recent years, Ram pickup trucks have gained on chief
competitors, the Chevy Silverado and Ford's F-Series trucks, by
offering luxurious interiors and new tech features, such as big
media displays.
Ram's truck sales now account for more than one third of the
company's U.S. sales -- up from less than a quarter at the start of
2019 -- and the brand gained market share in the third quarter.
Ram's strength helped drive an operating profit of $2.9 billion in
North America in the third quarter.
The company's operating margin in the region was 13.8%, a record
for North America.
The company said it doesn't anticipate any further disruptions
from the Covid-19 pandemic in 2020. Still, inventory is constrained
in North America, where its efforts to recover from a nearly
two-month shutdown this spring have been complicated by it having
to retool several plants for new models.
The company's troubles in Europe also endured in the
third-quarter with it posting its fifth-straight quarterly loss in
the region. Mr. Manley said progress was made in the past quarter
as the company bids to return to profitability there.
"This bodes well for the fourth quarter," Mr. Manley told
analysts.
Fiat Chrysler eked out a third-quarter operating profit of $53.9
million in Latin America -- the first time this year a region
outside North America reported positive results. Asia remained a
headwind, with the company posting an adjusted loss of $37.5
million.
The Maserati brand reported an $82 million operating loss.
Fiat Chrysler's revenue fell 6% to $30.3 billion in the third
quarter, compared with the same period last year.
Fiat Chrysler has been pushing to improve its financial
performance ahead of a planned merger with PSA. On Wednesday, the
two car makers said their boards had signed an agreement on merger
terms that would apply to the new company, to be called
Stellantis.
The PSA and Fiat Chrysler boards also agreed to allow PSA to
sell 7% of its shares in Faurecia SE before the merger is
completed. PSA had previously agreed not to sell shares in the
auto-parts maker until at least six months after the deal
closes.
(END) Dow Jones Newswires
October 28, 2020 11:21 ET (15:21 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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