Fiat Chrysler Q3 earnings rise 29 percent; Europe profit surges
MILAN -- Fiat Chrysler Automobiles reported a 29 percent rise in third-quarter adjusted operating profit and raised its full-year guidance, but recall costs weighed on the company's results.
The automaker said adjusted earnings before interest and tax for the July-September period rose to 1.5 billion euros ($1.63 billion).
Sales were flat at 26.8 billion euros ($29.1 billion).
Net income improved to 606 million euros ($659 million) from a net loss of 387 million euros during the same quarter last year. The company took a $667 million charge last year for regulatory and recall costs.
In the latest quarter, FCA said it took another charge for recalls of about 149 million euros ($162 million), noting that there is ongoing litigation with a supplier for a planned recall. "Although FCA believes the component supplier has responsibility for the recall, no recovery has been recognized as of Sept. 30," the report said.
Adjusted earnings in North America rose to 1.28 billion euros ($1.4 billion) from 1.19 billion euros during the same quarter last year.
Earnings in Europe surged to 104 million euros from 20 million euros, mainly driven by higher net revenues following the launch of the Fiat Tipo compact range, purchasing efficiencies, improved results from joint ventures and favorable exchange rates, Fiat said. The result was partially offset by higher advertising to support new product launches, as well as higher research and development and manufacturing costs.
Luxury marque Maserati posted profit of 103 million euros, compared with just 12 million euros a year ago, as shipments surged 54 percent on the rollout of the new Levante SUV.
FCA, which spun off luxury unit Ferrari at the start of this year, said net industrial debt rose to 6.5 billion euros by the end of September from 5.5 billion euros three months earlier.
The company raised its 2016 profit forecast for the second time this year, boosting the target on robust demand for Jeep SUVs.
Full-year adjusted earnings before interest and taxes is expected to increase to at least 5.8 billion euros ($6.3 billion), compared with a July prediction of more than 5.5 billion euros, the carmaker said.
FCA, which generates the lion’s share of its profit in North America, is bracing for slowing growth in the U.S. by adjusting production to higher-margin pickup trucks and SUVs and away from small cars. Third-quarter profit in the region rose to 7.6 percent of sales from a margin of 6.7 percent a year ago.
Overall, the company posted a profit margin of 5.6 percent.
“Profit margins were quite encouraging,” said Stuart Pearson, a London-based analyst with Exane BNP Paribas. “The raise to the guidance is helpful but the expectation for that to happen was already there.”
Amid delays in plans to expand Alfa Romeo, Jeep has been the bright spot in FCA's strategy. The company expects the offroad nameplate’s 2016 deliveries to increase about 17 percent to 1.45 million vehicles as it boosts production in China and Brazil. Its target by 2018 is to expand annual sales to more than 2 million vehicles from 338,000 in 2009.
Bloomberg and Automotive News staff contributed to this report.