Business context and reporting period
This is Fiat Chrysler Automobiles N.V.’s (FCA) annual report on Form 20-F for the fiscal year ended December 31, 2018, prepared under IFRS. It is not a standalone fourth-quarter filing; quarterly results are not clearly presented in the supplied filing text. The request names Stellantis, but the filing is for FCA, before Stellantis was formed. The financial statements received an unqualified audit opinion.
FCA designs, manufactures and sells vehicles globally across its mass-market brands and Maserati, with related parts, financing and industrial activities. Magneti Marelli was classified as a discontinued operation and held for sale in 2018; comparative income-statement and cash-flow results were recast, but 2017 balance-sheet comparatives were not.
Key financial metrics
Amounts are in euros unless indicated otherwise. Changes are year over year.
| Metric | 2018 | 2017 | Change / context |
|---|---|---|---|
| Net revenues | €110.412 billion | €105.730 billion | +4.4% reported; +9.3% at constant exchange rates |
| Net profit from continuing operations | €3.330 billion | €3.291 billion | +1.2%; diluted continuing-operations EPS was €2.12 versus €2.11 |
| Total net profit | €3.632 billion | €3.510 billion | Includes discontinued operations profit of €302 million versus €219 million |
| Adjusted EBIT | €6.738 billion | €6.609 billion | +2.0%; margin 6.1% versus 6.3% |
| Adjusted net profit | €4.707 billion | €3.512 billion | +34.0%; non-IFRS measure |
| Operating cash flow | €9.948 billion | €10.385 billion | Includes discontinued operations; continuing-operations cash flow was €9.464 billion |
| Industrial free cash flow | €4.342 billion | €1.563 billion | Includes Magneti Marelli for comparability and adds back €478 million of discretionary pension contributions, net of tax |
| Capital expenditures | €5.392 billion | €8.105 billion | Cash investment in property, plant, equipment and intangible assets |
| Cash and cash equivalents | €12.450 billion | €12.638 billion | Balance-sheet cash |
| Total debt | €14.528 billion | €17.971 billion | Down €3.443 billion |
| Net industrial cash / (debt) | €1.872 billion cash | €2.390 billion debt | Improved €4.262 billion |
| Available liquidity | €21.125 billion | €20.377 billion | Includes €13.397 billion cash, cash equivalents and current securities, plus €7.728 billion undrawn committed lines; includes Magneti Marelli |
| Total equity | €24.903 billion | €20.987 billion | Increased €3.916 billion |
Cost of revenues was €95.011 billion, or 86.1% of revenue, versus €89.710 billion, or 84.8%, in 2017. The resulting simple revenue-less-cost-of-revenues margin was approximately 13.9%, down from 15.2%. Profit before tax fell to €4.108 billion from €5.879 billion, partly because 2017 included an €895 million Brazilian indirect-tax liability reversal. The effective tax rate decreased to 18.5% from 44.2%, reflecting, among other items, tax benefits recognized in 2018 and deferred-tax-asset charges recorded in 2017.
Combined shipments, including unconsolidated joint ventures, rose to 4.842 million vehicles from 4.740 million. Segment Adjusted EBIT was €6.230 billion in NAFTA, €359 million in LATAM, negative €296 million in APAC, €406 million in EMEA and €151 million in Maserati.
Material changes versus the prior comparable period
- NAFTA revenue and Adjusted EBIT increased with higher shipments, favorable mix and pricing, led by new Jeep and Ram models. NAFTA remained the largest earnings contributor.
- LATAM Adjusted EBIT improved to €359 million from €151 million, supported by volume, mix and Brazilian pricing; currency weakness and Argentina’s downturn remained drags.
- APAC shifted to a €296 million Adjusted EBIT loss from €172 million of income. Lower revenue, weaker GAC FCA joint-venture results and the absence of the prior-year Tianjin insurance recovery weighed on performance.
- EMEA Adjusted EBIT decreased to €406 million from €735 million, amid WLTP transition effects, pricing pressure, incentives and lower shipments.
- Maserati Adjusted EBIT fell to €151 million from €560 million as shipments dropped 31.4%, particularly in China; the Levante represented more than half of Maserati volumes.
- FCA recorded a €748 million provision for settlements of U.S. diesel-emissions civil, environmental and consumer claims. The 2018 tax and financial-expense reductions partly offset this and other operating pressures.
- Magneti Marelli generated €302 million of discontinued-operations profit in 2018. Its sale agreement, announced in October 2018, valued the transaction at €6.2 billion, subject to adjustments and closing conditions.
Outlook, management commentary, risks and unusual items
- The filing states that its 2019 Guidance section was removed from the SEC Form 20-F. It therefore does not provide the full formal guidance in this filing. Management separately expected 2019 capital expenditures of approximately €8.5 billion.
- The 2018–2022 business plan emphasizes Jeep, Ram, Maserati and Alfa Romeo product expansion; electrified powertrains; cost and manufacturing efficiencies; growth in China and improved Maserati performance; technology partnerships; and disciplined capital deployment.
- Subject to closing the Magneti Marelli sale and Board approval, FCA said the transaction would enable a €2 billion extraordinary dividend. Separately, the Board intended to propose an ordinary dividend of €0.65 per common share, approximately €1 billion in total, for shareholder approval in April 2019.
- FCA announced final settlements on U.S. diesel-emissions claims in January 2019, with approximately €350 million of the accrued €748 million provision attributable to civil penalties. SEC and U.S. Department of Justice criminal investigations, private litigation and inquiries in other jurisdictions remained unresolved; further losses could not be reliably estimated.
- Other material risks include vehicle recalls and warranty costs, increasingly stringent emissions and safety rules, tariffs and trade uncertainty, exposure to demand for higher-margin U.S. trucks and SUVs, supplier concentration and input costs, currency and interest-rate movements, and the cyclicality of vehicle demand.
- The company disclosed approximately €4.0 billion of underfunding in defined-benefit pension plans. Funding needs, returns on plan assets and discount-rate assumptions could affect cash requirements and results.
- Management reported effective disclosure controls and internal control over financial reporting as of year-end. The auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Confirm whether the €6.2 billion Magneti Marelli transaction closed on the expected timetable, its final adjusted proceeds, and the treatment of the proposed €2 billion extraordinary dividend.
- Review the final shareholder approval and payment details for the proposed €0.65 ordinary dividend.
- Track remaining diesel-emissions investigations and litigation, settlement payments, and any claims beyond the recorded €748 million provision.
- Assess whether APAC, EMEA and Maserati performance improved, and whether FCA achieved its 2018–2022 product, electrification and margin objectives.
- Reconcile the reported €4.342 billion Industrial free cash flow with its non-GAAP definition, including the pension-contribution adjustment and discontinued-operations scope.
- Monitor liquidity and debt alongside the €8.5 billion 2019 capital-spending expectation, pension funding and the distinction between industrial and financial-services debt.