When in doubt, sell. This is the philosophy that the operators have applied to Fiat, following the announcement of the expected third quarter results. The title of the Lingotto, already suspended due to excessive downwards, sinks well below 4 euros, nullifying the morning's gains on the wave of Chrysler results.
Yet, at least on first reading, not everything is so negative at Fiat. To begin with, in the third quarter, the Fiat group recorded an increase in trading profit to 951 million euros (851 million in the third quarter of 2011), better than the average forecasts of analysts (910 million). Even net income, more than double compared to 2011, exceeds market estimates (286 million against expectations for 250 million).
The positive notes, however, end there. For the rest, already known and less obvious unknowns weigh on the accounts and, even more, on the prospects of the car group. Let's see which ones:
a) Fiat, reads a note, "refined its economic targets for 2012 to the lower end of the original range". In other words, for this year, with revenues of approximately 83 billion lire, trading profit will not go beyond 3,8 billion, at the lowest point of the range identified three months ago when the previous bar was lowered ( between 4,6 and 5,3 billion). Is it over here or will the downward revision continue in the next quarter?
b) As already foreseen, Fiat has in fact lowered the targets for the next few years: trading profit is expected for 2013 between 4 and 4,5 billion; for 2014, on revenues between 94 and 98 billion (against the 104 billion already forecast), trading profit is forecast between 4,7 and 5,2 billion. And then?
c) The reason for greater concern, as usual, concerns the level of debt, which has grown despite the tightening on investments. In short, during the last quarter, Fiat burned cash. Of course, the company promises that by the end of the year, net industrial debt will drop to 6,5 billion. But for now the bar has risen to 6,7 billion.
d) From the point of view of strategies, the Fiat group announces, through the slides of Sergio Marchionne's presentation to analysts, that it has chosen the option of "leveraging the great historic premium brands such as Alfa Romeo and Maserati, realign the product portfolio and reposition the business for the future”. The alternative was to "remain focused on a non-premium mass market and rationalize production capacity by closing one or more" plants. In other words, Fiat focuses on products with higher added value to be exported to the US market. The investments to renew the traditional range can wait.
e) The market takes note of this decision, already taken for granted and, in large part, obligatory. As underlined in a note from Morgan Stanley, Marchionne must achieve two objectives: to rotate the Italian factories, today dramatically underutilized, and to limit the expansion of Chrysler with respect to the Lingotto. Otherwise the Detroit cousin risks acquiring too much value compared to the ingot, thus making the execution of the original contract problematic. The US union is reluctant to sell its shares at the price agreed in the past (much lower than today's real value), which among the parameters also included Fiat's Ebitda. The two parties will soon meet in the Delaware court, given that the UAW's statement will have to be filed by Sunday 5 November. Then, however, the US elections will already be a done deal. And who knows if his friend Barack Obama will still be in the White House or that Mitt Romney who has already targeted super Sergio.
