FCA 2018 third quarter results

FCA reports record Adjusted EBIT at €2.0 billion and margin at 6.9%, including Magneti Marelli. NAFTA up 51% with margin at 10.2%, Adjusted Net Profit at €1.4 billion, up 51%. Net Profit down 38% to €0.6 billion, including €0.7 billion charge related to U.S. diesel emissions matters. Operating metrics guidance confirmed; Net industrial cash reflects production realignment to expected demand and accelerated discretionary pension contribution.

• Worldwide combined shipments⁽²⁾ of 1,160 thousand units, up 3%, mainly due to NAFTA and LATAM, partially offset by APAC and EMEA
• Net revenues⁽¹⁾ of €28.8 billion, up 9% (up 11% at constant exchange rates, or CER), with higher shipments, positive pricing and mix
• Adjusted EBIT^(1),(3) of €1,995 million, up 13% (up 16% at CER), with margin up 20 bps to 9%
• Adjusted net profit^(1),(3) of €1,396 million, up 51% (up 54% at CER); Net profit of €564 million, down 38% (down 33% at CER) reflecting a €0.7 billion charge for estimated costs related to U.S. diesel emissions matters^(*)
• Net industrial debt⁽¹⁾ of €0.2 billion, after acceleration of €0.6 billion discretionary pension contribution, net of tax
• Moody’s raised FCA’s outlook to positive from stable and affirmed its Corporate Family Rating at “Ba2”
• Agreement announced to sell Magneti Marelli to CK Holdings , Ltd. The combined business will operate under the name Magneti Marelli CK Holdings. The agreement represents a transaction value of €6.2 billion
• Transaction enables payment of an extraordinary dividend of €2 billion at closing, which is in addition to the commencement of an annual ordinary dividend in Spring 2019 of 20% of earnings as presented at 2018 Capital Markets Both are subject to Board of Directors and shareholder approval

The following Group results⁽¹⁾ include Magneti Marelli for comparability with prior periods and previously provided guidance

(*) This charge does not represent an agreed settlement amount nor an admission of liability, but represents an estimate of the provisions under applicable accounting guidelines based on progress of settlement discussions with counterparties.

⁽¹⁾ Refer to page 2 for highlights excluding Magneti Marelli in line with its presentation as a discontinued operation in the Interim Report for the three and nine months ended September 30, 2018; ⁽²⁾ Combined shipments include all shipments by the Group’s unconsolidated joint ventures, whereas consolidated shipments only include shipments from the Group’s consolidated subsidiaries; ⁽³⁾ Refer to page 6 for the reconciliations of Net profit to Adjusted EBIT, page 7 for the reconciliations of Net profit to Adjusted net profit and Diluted EPS to Adjusted diluted EPS and page 8 for the reconciliations of Debt to Net industrial cash/(debt) and cash flows from operating activities to Industrial free cash flows; ⁽⁴⁾ Guidance is not provided on the most directly comparable IFRS financial statement line item for Adjusted EBIT and Adjusted net profit as the income or expense excluded from these non-GAAP financial measures in accordance with our policy are, by definition, not predictable and uncertain. Amounts include the results of Magneti Marelli and do not include any impacts from the announced sale of Magneti Marelli or U.S. diesel emissions matters.

Group results – excluding Magneti Marelli

As a result of the announced sale of Magneti Marelli and, in accordance with IFRS, Magneti Marelli will be presented as a discontinued operation in the Interim Report for the three and nine months ended September 30, 2018, and its results will be presented net of tax in a separate, single line item after Net profit from continuing operations, with the comparative amounts restated. The remaining Components activities are no longer considered a separate reportable segment and are included within “Other activities”.

⁽⁵⁾ Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided by third-party sources, including IHS Markit and Ward’s Automotive; ⁽⁶⁾ Our estimated market share data presented are based on management’s estimates of industry sales data, which use certain data provided by third-party sources, including IHS Markit, National Organization of Automotive Vehicles Distribution and Association of Automotive Producers; ⁽⁷⁾ Number is not meaningful.

⁽⁸⁾ Due to unavailability of market data for Italy, the figures reported are an extrapolation and discrepancies with actual data could

Q3 2018 Adjusted EBIT excludes adjustments primarily related to:

⁽⁹⁾ Adjusted EBIT – continuing operations excludes certain adjustments from Net profit from continuing operations including: gains/(losses) on the disposal of investments, restructuring, impairments, asset write-offs and unusual income/(expenses) that are considered rare or discrete events that are infrequent in nature, and also excludes Net financial expenses and Tax expense/ (benefit). Adjusted EBIT includes both Adjusted EBIT – continuing operations and Adjusted EBIT – discontinued operations.

⁽¹⁰⁾ Adjusted net profit – continuing operations is calculated as Net profit from continuing operations excluding post-tax impacts of the same items excluded from Adjusted EBIT – continuing operations, as well as financial income/(expenses) and tax income/(expenses) considered rare or discrete events that are infrequent in nature. Adjusted net profit includes both Adjusted net profit – continuing operations and Adjusted net profit – discontinued operations; (11) Adjusted diluted EPS – continuing operations is calculated by adjusting Diluted EPS for the post-tax impact of the same items excluded from Adjusted EBIT – continuing operations, as well as financial income/(expenses) and tax income/(expenses) considered rare or discrete events that are infrequent in nature. Adjusted diluted EPS includes both Adjusted diluted EPS – continuing operations and Adjusted diluted EPS – discontinued operations.

⁽¹²⁾ Excludes certain debt securities held pursuant to applicable regulations (€69 million at September 30, 2018, €67 million at June 30, 2018 and €59 million at December 31, 2017); ⁽¹³⁾ Net industrial cash/(debt) is computed as: Debt plus derivative financial liabilities related to industrial activities less (i) cash and cash equivalents, (ii) certain current debt securities, (iii) current financial receivables from Group or jointly controlled financial services entities and (iv) derivative financial assets and collateral deposits; therefore, debt, cash and cash equivalents and other financial assets/liabilities pertaining to financial services entities are excluded from the computation of Net industrial cash/(debt). Net industrial cash/(debt) should not be considered as a substitute for cash flows or other financial measures under IFRS; in addition, Net industrial cash/(debt) depends on the amount of cash and cash equivalents at each balance sheet date, which may be affected by the timing of monetization of receivables and the payment of accounts payable, as well as changes in other components of working capital, which can vary from period to period due to, among other things, cash management initiatives and other factors, some of which may be outside of the Group’s control. Net industrial cash/(debt) should therefore be evaluated alongside these other measures as reported under IFRS for a more complete view of the Company’s capital structure and liquidity; ⁽¹⁴⁾ Industrial free cash flows is calculated as Cash flows from operating activities less: cash flows from operating activities related to financial services, net of eliminations; Investment in property, plant and equipment and intangible assets for industrial activities; and adjusted for discretionary pension contributions in excess of those required by the pension plans.

SOURCE: FCA