FIAT S.p.A. (FIATY)

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Fiat SpA (FIATY)

Q3 2013 Earnings Conference Call

October 30, 2013 11:30 ET

Executives

Marco Auriemma - Head of Investor Relations

Sergio Marchionne - Chief Executive Officer

Richard Palmer - Chief Financial Officer

Analysts

Richard Hilgert - Morningstar

Martino De Ambroggi - Equita

Kristina Church - Barclays

Alberto Villa - Intermonte

Charles Winston - Redburn Partners

Stephen Reitman - Societe Generale

Jochen Gehrke - Deutsche Bank

Philippe Houchois - UBS

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to today’s Fiat Group 2013 Third Quarter Results Conference Call. For your information, today’s conference is being recorded. And at this time, I would like to turn the conference over to Mr. Marco Auriemma, Head of Fiat Group Investor Relations. Mr. Auriemma, please go ahead sir.

Marco Auriemma - Head of Investor Relations

Thank you, Debra. Good afternoon and good morning to you all, and welcome to Fiat Group’s third quarter 2013 results webcast and conference call. The earnings release issued earlier today is available together with a conference call chart set on our website.

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

Before we start just on an housekeeping note, let me remind you that any forward-looking statements we might be making during today’s call are subject to the risks and uncertainties mentioned within the Safe Harbor statement on Page 2 of the presentation material. As always the call will be governed by this language. Also Chrysler Group LLC recently filed a registration statement with the U.S. SEC to register its equity securities pursuant to a contractual demand from the VEBA Trust.

Under U.S. SEC rules we are not permitted to answer any questions relating to the registration statement or the IPO describe the theory. We would appreciate if you could respect this limitation and not asking questions during the Q&A session on this topic, as we won’t be able to answer these questions.

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

Sergio Marchionne - Chief Executive Officer

Thank you, Marco. I’m going to spend a few minutes talking about some of the elements on slide three which are – which contains the executive summary of the performance in the third quarter and I guess some views about the future, certainly about 2013. I’ve had a chance to see some of the comments that are coming from the analyst community as a result of the issuance of the press release and I would like to at least clear up a couple of issues that appear have gone either unnoticed or misunderstood.

We had a rather lengthy presentation today on the Chrysler Call on the industrial issues that Chrysler faced in Q3 of 2013 and I think we are all aware of the fact that there were delays in the launch of a significant product in the Jeep line which is now been resolved and cars are making their way at a pretty rapid clip into the U.S. dealer network. So that issue is an issue which has caused certainly a lumpy working capital build at the end of Q3, it’s worth probably about €0.5 billion in terms of net impact on debt for the - when I compare them year-over-year.

And so that explains, that’s a spectacular performance in terms of cash flow generation of Chrysler. That – is that also an implication in terms of where the net debt position for Chrysler, for Fiat overall has ended up. And if you add on what I would consider to be the one-off unusual part of our capital expenditure profile which is a build-out of our Pernambuco plant which is worth in excess of €0.5 billion as of September 30 of this year. We’re looking at a combined impact on net debt to roughly €1 billion, a number that we should be able to absorb as part of working capital reversal in the fourth quarter of this year.

Though some of the signs have alarmed that I have seen come out from the – at least the initial assessment of our leverage position I think are probably misplaced and I think we can provide color to the significance of those events as we go through the presentation. The other thing that I notice coming back in from the initial remarks is that somebody appears to believe that somehow we’ve changed guidance. And I think we’ve been incredibly and probably bias diligently in outlining our guidance at historical rates was how that was framed and what the impact of the 4X movements have been on that guidance as of the end of September.

We are effectively confirming guidance within the Foreign Exchange limitations associated with the original forecast and in fact with the numbers that we are re-pitching now, incorporate the 4X movement and there is no significant change in guidance consistent we’ve done with Chrysler on the earlier call. We are relatively set aside with the development of the markets. There are obviously issues that come up in the third quarter which is somewhat discerned from the views that we express of our Latin America in the second quarter and which Richard will take you through as we go through the presentation and will come back to it if there are questions. We are encouraged by the improvement and performance in EMEA. I think the fact that we keep on reducing our operating losses in EMEA in this environment is a good sign especially in view of my own personal conviction that we will not see a restoration of healthy markets going forward either in 2013 or in 2014 I think we are looking pretty much over a flat line.

We are at best, a very marginal improvement over current levels. APAC continues to perform well. I think that we’re also encouraged by the progress that has been made there. Enough has been said about NAFTA especially in view of the presentation that was done with Chrysler. We continue to perform as forecast and in line with the guidance as was given. The investments that we are making some of which are outlined here on slide three especially the further redeployment of the Mirafiori plant towards the production of an SUV which is finally been announced, that is being actioned as we speak is a further confirmation of the fact that we’re moving away and effectively we are moving away from the traditional utilization of our industrial assets towards the premium strategy which has been outlined earlier on our calls.

The car that’s being added to the Maserati platform is a necessary ingredient to the filling out of the brand, I think it’s because of all the work that’s gone on with Maserati in the last three years this is the normal natural extension of its activity. I think we will be producing a unique vehicle which has unique attributes and which is consistent with the brand heritage and the positioning of the brand today. Well it’s not on this slide is the fact that we continue to work in the Alfa Romeo platform that something that I think we’ll be in a position to outline more fully when we put together this Investor Meeting which is now forecast for the first – the end of the first quarter of 2014 and which is going to be the occasion where I think we will give you an opportunity to look to the five year plan based on the thorough assessment of the brand potentials and not just in terms of Alfa Romeo but also in terms of the Chrysler, the other Chrysler and Fiat brands.

Read the rest of this transcript for free on seekingalpha.com