Fiat S.p.A. (FIATY.PK)

Q2 2012 Earnings Conference Call

July 31, 2012 12:00 PM ET

Executives

Marco Auriemma – Head, IR

Sergio Marchionne – CEO

Richard Palmer – CFO

Analysts

Charles Winston – Redburn Partners

Richard Hilgert – Morningstar

Martino De Ambroggi – Equita

Fraser Hill – Bank of America

Jochen Gehrke – Deutsche Bank

Massimo Vecchio – Mediobanca

Philippe Houchois – UBS

Presentation

Operator

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Good afternoon, ladies and gentlemen, and welcome to today’s Fiat Group 2012 Second Quarter and First Half Year Results Conference Call. For your information, today’s conference is being recorded.

At this time, I would like to turn the call over to Marco Auriemma, Head of Fiat Group Investor Relations. Mr. Auriemma, please go ahead, sir.

Marco Auriemma

Thank you, Sammy. Good afternoon to you all and welcome to Fiat Group’s second quarter 2012 results webcasting conference call. As you know, the press release was issued earlier this afternoon and is available together with the conference call chart set on our Investor Relations website.

As usual, today’s call will be hosted by the Chief Executive, Sergio Marchionne, and by Richard Palmer, the Chief Financial Officer. After introductory remarks, we’ll be available to answer all the questions you may have.

Before we begin, let me just remind you that any forward-looking statements we might be making during today’s call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included in the presentation material. As always, the call will be governed by this language.

With that, I would like to turn the call over to Sergio Marchionne.

Sergio Marchionne

Thank you, Marco. Good afternoon. Good quarter for Fiat, obviously on the back of some reasonably strong results for the Chrysler which helped the bottom line. Fiat with Chrysler, as you know, from the press release and from the analyst deck would have showed a loss. A couple of points of references just to get the conversation started before I pass it onto Richard and then we end up taking question.

The European market continues to show signs of weakness. We’re in the process of closing Italy here in a few hours. And I think you will see that the number in July, the market is probably down around 20% year-over-year. My forecast for the Italian market is at 1.4 million or slightly less than that number, which is a substantial decrease for both 2011. And for those of you who have sufficient memory of historical records, we were about 2.5 million back in 2007, nearly 2.5, so a substantial decrease in volumes.

Europe continues to show signs of weakness. It is highly unlikely that this market will recover in 2012. And we are – as we mentioned in the last conference call, we’re in the process of revisiting our expectations – the European market we’re doing that now. We’ll finalize the analysis on our Q3 call and present our findings, our intensions in terms volume ambitions at that time. So either and confirming the continuing weakness of Europe, I really have nothing to add.

We’re very much encouraged what has happened Latin America. As you all know there were concerns that were lingering at the time that we got together and last time about the strength of that market, a number of initiatives have now been placed, have been put in place by the government, they are effective, Richard will take you through some data that will show the efficacy or the measures we’ve seen significant ramp up in daily volumes in Brazil and allow those to confirm our guidance vis-à-vis the region for the whole of 2012 than in all likelihood in 2013.

NAFTA continues to perform well and certainly in line with and to our own expectations. As I mentioned during the course of the call and you will see this from some of the charts that Richard will talk about. We are now running at excess of 100% technical capacity of the system. In the United States we are adding on additional shift and all indications are the volume for the second half of the year will be more or less equal to what we’ve been able to produce in the first half of 2012.

APAC is a work in process. I think you’ll see from the numbers, we continue to make money in the region and withstanding the fact that we are relatively embryonic stage of development. I think the best is yet to come, but I think we’ve put the structure in place now to drive business going forward. I really have no bad news to give you as I did not have any bad news on the Chrysler call.

We have now refinanced all of our 2012 requirements. We’re sitting on what I consider to be an inordinate amount of liquidity in the system. And we have done this as a sign of precaution and safety given the volatility of the markets and we are confirming guidance for the year. I think you know the question is to whether we hit the €4 billion trailing profit number or not is to be seen and probably we’ll have better view on this by the end of the third quarter.

But really not much else to add, a good quarter in line with expectations and as I said earlier, I think what are the nagging doubts we had about the large American position and the book to bed and (inaudible) reassured us in terms of our investment plans for the – for the region and we’re going to be doing there for the next two or three years.

So on that basis, Richard, why don’t you take them through the numbers and I will come back and take questions.

Richard Palmer

Thank you and good evening, everybody. Go to page three on the deck, the results for the quarter. Revenues were €21.5 billion, trading profit of €1 billion with all regions contributing positively with the exception of Europe where losses were reduced compared to first quarter this year. And net profit at €358 million, net industrial debt was reduced to 5.4 billion and our total liquidity at the end of quarter was €22.7 billion, including 3 billion of our credit lines.

Shipments for the quarter were 1.1 million units and I think just over 2.1 million for the year-to-date. During the quarter we signed an MoU with Mazda for the production – for the development and production of Alfa Romeo roadster and we expect to complete that agreement in the second half of this year.

As you are aware, we completed the conversation of the Fiat preference saving shares into ordinaries. We have notified and exercised the option on the VEBA to purchase a portion of VEBA’s interest in the Chrysler Group. We haven’t yet settled that transaction. That amount is 3.3% of the company and would add to the 58.5 to get to nearly 62% at closure.

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