Sergio Marchionne's goal, as usual, is very ambitious: halving Fiat Chrysler's debt to 2,5 billion euros within the year to then close the accounts at the end of 2018 (on paper the last financial year signed by the manager) with more than 4 billion in cash, a prerequisite for facing the next season of alliances in the world with the cards in order wheels. Fourth quarter accounts presented yesterday in London demonstrate, as Evercore analyst George Galliers commented, that “the company is on track to hit the target. Let's see why.
At first glance, the accounts for the fourth quarter disappoint: in particular, the last three months closed with revenues of 29,7 billion euros, slightly better than the 29,3 billion estimated by analysts. In the course of the entire year revenues were slightly down (111,315 billion against 111,018 billion the year before). Also 12-month adjusted net income is up 47% at 2,516 billion euros, better than the expectations of the Bloomberg consensus at 2,278 billion. Despite this, in the fourth quarter of 2016 there was a contraction of 48% to 539 million.
Ebit stood at 1,55 billion, not far from the 1,56 billion estimated by experts. In the 12 months it rose by 26% to 6.056 million (also in this case well beyond the forecasts at 5,555 billion). Margin was up 120 basis points to 5,5% and adjusted net income up 47% to $2,5 billion, above the manufacturer's target of $2,3 billion. In North America in particular, deliveries fell by 2016% to 5 million units in 2,59 with revenues down by 1% to 69,09 billion, but adjusted EBIT rose by 15% to 5,13 billion (+15% at constant exchange rates) and an adjusted Ebit margin which rose to 7,4% (from 6,4%).
Debts improve: the net financial position is negative by 4,4 billion, better than the -4,9 billion estimated by analysts. The company's net industrial debt fell to 4,585 billion euros from 5,049 billion recorded as at 31 December 2015 and from 6,514 billion as at 30 September 2016. All thanks to an industrial cash generation which, net of investments for 8,8 billion euros, was equal to 1,8 billion and excluding the negative exchange rate effect of 1,1 billion euros, essentially attributable to the strengthening of the Brazilian real. The overall debt also decreased, passing in one year from 27,786 billion at the end of 2015 to 24,048 billion. Available liquidity was solid, amounting to 23,8 billion euro at the end of the year.
In short, the accounts reflect a profound change in strategy (fewer sales to less profitable corporate fleets, less commitment to small cars) which has made it possible to sell larger cars, starting with Rams and Jeep-branded SUVs, vehicles that have everything to gain from change of course in the environmental policy envisaged by the Trump administration. Also for this the fine imposed by the EPA, the swan song of Obama-era environmental policy, is practically no longer scary. “The group – Marchionne said – is in the midst of an intense confrontation”. “The discussions are going well – he continued – we will reach a conclusion soon enough”. And to the delight of the new president of the United States, Marchionne confirmed the investment in three new plants in Ohio, Michigan and Illinois for 2,5 billion dollars capable of creating 1.700 jobs.
In summary, says Marchionne, "we have made all the necessary industrial decisions and our goal is to implement the plan". A 2014-2018 process which, to date, has already been completed for 60%. The Stock Exchange cautiously believes it and the share (+0,8%) has risen to 10,29 euros, close to the maximum price (10,70) reached before the cold shower of the American dieselgate.
