Fiat's CEO Discusses Q4 2011 Results - Earnings Call Transcript
Fiat S.p.A (
)
Q4 2011 Earnings Conference Call
February 1, 2012 10:00 AM ET
Executives
Marco Auriemma – Head of Investor Relations
Sergio Marchionne – Chairman and Chief Executive Officer
Richard Palmer – Chief Financial Officer
Analysts
Charles Winston – Redburn Partners
Martino De Ambroggi – Equita SIM
Stuart Pearson – Morgan Stanley
Thierry Huon – Exane BNP
Philippe Houchois – UBS
Richard Hilgert – Morningstar Inc.
Max Warburton – Sanford C. Bernstein & Co.
Eric Hauser – Credit Suisse
Presentation
Operator
Good afternoon, ladies and gentlemen, and welcome to today’s Fiat S.p.A 2011 Fourth Quarter and Full Year Results Conference Call.
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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 S.p.A Investor Relations. Mr. Auriemma, please go ahead, sir.
Marco Auriemma
Thank you (inaudible). Good afternoon to you all or good morning as the case may be. And welcome to Fiat’s Fourth Quarter and Full Year 2011 Results Webcast and Conference Call.
As usual, today’s call will be hosted by the Chief Executive, Sergio Marchionne, and by Richard Palmer, the Chief Financial Officer. They will use the material we shared. You should have downloaded it from our website, fiatspa.com. And after introductory remarks, they will be available to answer all the questions you may have.
Before moving ahead, let me just remind you that any forward-looking statements we might be making during today’s call are subject to the risk and uncertainties mentioned in the Safe Harbor language contained in the presentation material.
So, now, I will turn the call over to Sergio Marchionne.
Sergio Marchionne
Thank you, Marco. Good afternoon. I think it’s fair to say that 2011 has been for a variety of reasons for Fiat-Chrysler been an outstanding year.
We’ve had, in addition to the numerical achievements, revenues of nearly €60 billion, a trading profit of, what, €2.4 billion, the fact that we ended up with a net of a €1.7 billion. And then if you take out the unusuals, so roughly a billion we signed up, over a €700 million net after all this. The fact that we’ve got €20 billion worth of liquidity in the system.
These are all things which are absolutely consistent with the view that notwithstanding the very difficult trading conditions – and we’ll talk more about this as we go forward – but a very difficult trading conditions that we’re all experiencing in Europe that Fiat-Chrysler is on solid ground and that it can face the next phase of development in Europe with some serenity.
I think we are engaged in a number of fronts internationally now. You’ll see as we go through the presentation that we’re already now talking about a global car company and no longer one which had two fundamental themes and underperforming European set of assets and a set of assets in Latin America that continued and are set to be continued to perform well.
But we’re now – we have been able to flag that with a phenomenally strong North American operation, which has allowed us to devote resources both in terms of time and technical resources, the development of our position in Asia Pacific.
So we told you when we presented our plans a few months that we’d be targeting about 4 million cars this year. That’s the number that we’ve hit. But more importantly, it allows us to look at 2012 with some level of confidence.
I know that you certainly have read from the preliminary remarks that have come forward that there’s a lot of skepticism about the ability of any European car market to respectively post a decent set of numbers in the current year.
I think it’s fair to say that Fiat-Chrysler was purely a European ply that we will be looking at a completely different reality going forward. The combination of Fiat-Chrysler now allows us to look at 2012 with a guidance which, for those of you who remember the old Fiat before the demerger in 2008, had achieved about €3.3 billion worth of operating profit.
We’re now looking at car company alone without the industrial side that will produce a number in 2012 in excess of that target. We’ve put in a number of €3.8 billion to €4.5 billion. And we’ve had the cost from the range, which is probably the first time that certainly I’ve had to do here.
I’ve had to do this since I’ve been here in 2004 where we’ve had to put back – there are at least a set of ranges around that outcome because we have uncertainty around the rate of recovery of the Eurozone. Having said this, we’re still forecasting a net income between €1.2 billion and €1.5 billion.
We’re going to have – there’s a likelihood that we may grow that to around a €6 billion number purely because of the size of the capital expenditure profile that we’re contemplating for 2012.
And the last bullet is on page two, which deals with the fact that we’ve now achieved a 50.5% equity interest in Chryslers now. So it’s history. We’ve got the last 5% in January by meeting the last of the equity event, the ecological event.
So, we now are left with VEBA as the other shareholder. It’s a shareholder whose position we have instead of call options, which expires in 2016 and allow us to buy up to 40% of their interest.
If I can just get to page four, we’ll use this as a basis, I’m sure, for some of the Q&A that will be directed after the presentation. We tried to give you an idea of the profit split for this new global car company.
The left hand portion of the slide deals with the revenue side. And you can see that, effectively, the integration of Chrysler and these are bit down in a pro-forma basis, including Chrysler for the whole of 2011.
The NAFTA and our camps are nearly half of the overall volumes of the combined Fiat-Chrysler group, and that when you look at the profit origin of the trading profit associated with Fiat-Chrysler, again, on a pro-forma basis on the assumption that we had owned Chrysler throughout the year, you find that there’s almost a negligible slice of that pie which has been labeled EMEA car.
And EMEA car, unfortunately, is made up of a couple of (inaudible). It’s made up of a number which reflects a luxury brand. And then, there’s a number which is the mass market portion of European operations. So, you can see relatively clearly that the mass market business in Europe has lost nearly half a billion or about half a billion in 2011.
The picture wouldn’t change drastically if you compare it to 2010. But it does reinforce our view that the structural imbalance that exists within the European market are things that need to be addressed and they need to be addressed in a particular way.
Fiat-Chrysler has chosen a particular method of addressing this issue. It’s begun to look at the European asset base as an extension of the global manufacturing base of Fiat-Chrysler. And it made a commitment to try and develop these assets in a way which is absolutely consistent with and in accordance with a product development plan, which is driven not only by EMEA, the European market, but it’s also driven by demand in other parts of the world.
In order to get that done, we – let me deal with some of the propaganda slides. Let me deal with slide number five, which tells you that we are now a credible player. We’re number seven on a list of global car producers. And I’m not going to try and (inaudible) the information on slide six.
I mean, we have announced a group executive council formation in the second quarter of 2011. The integration activities continue unabated. I mean, they’re picking up an intensity and strength. I expect to have half for the work of integration in terms of making this look and smell like as a one-car company by the end of this year. Hopefully, we’ll be able to exceed that target.
So there’s a lot of information on page seven which may require that we spend some time getting to grips with this. The left hand side is our best approximation of what the utilization using harbor definitions. It’s of the various geographic areas within which we function.
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