Stellantis N.V. annual report, Q4 FY2020

Business context and reporting period

Stellantis N.V.’s Form 20-F covers the fiscal year ended December 31, 2020, not a standalone fourth quarter. The reported audited financial statements are those of legacy Fiat Chrysler Automobiles (FCA); PSA figures are presented for context and are not consolidated into FCA’s 2020 results. FCA and PSA completed their merger in January 2021. Stellantis expects future filings to present PSA’s historical financial statements under reverse-acquisition accounting.

FCA operated across North America, Latin America (LATAM), Asia-Pacific (APAC), Europe, the Middle East and Africa (EMEA), and Maserati. The filing reports in euros and uses IFRS.

Key financial metrics

Cost of revenues was €75.962bn, or 87.6% of revenue, versus 86.1% in 2019. The effective tax rate rose to 97.0% from 32.7%, mainly reflecting €549m of deferred tax asset write-downs in Italy and Brazil and lower pretax earnings. Total 2020 net profit was €24m; 2019’s €6.630bn included €3.930bn from discontinued operations, principally the Magneti Marelli sale, making headline net profit comparisons less comparable.

Combined shipments, including unconsolidated joint ventures, were 3.435m vehicles, down 22.2%; consolidated shipments were 3.254m, down 23.8%. Capital expenditures for industrial activities were €8.598bn. Cash flow and liquidity figures are FCA historical measures; available liquidity includes current securities and should not be treated as cash alone.

Material changes versus the prior comparable period

• COVID-19 disrupted demand, dealerships, supply chains and production, with temporary plant shutdowns across regions in the first half. FCA said operations recovered substantially in the second half.
• Adjusted EBIT fell primarily due to lower volumes, partly offset by North America performance, favorable pricing and vehicle mix in some regions, and cost reductions.
• North America remained the largest profit contributor: revenue was €60.322bn and Adjusted EBIT €5.351bn, down 20.0%. LATAM Adjusted EBIT fell to €6m from €501m; EMEA reported an Adjusted EBIT loss of €918m versus €6m; Maserati’s loss widened to €232m from €199m. APAC’s loss widened to €116m from €36m.
• FCA’s 2020 operating cash flow was supported by working-capital movements, including lower inventories and higher trade payables. Industrial free cash flow nonetheless declined sharply from 2019.
• Debt rose following pandemic liquidity measures, including a €6.3bn Intesa Sanpaolo facility, €3.5bn of notes and European Investment Bank loans. The €6.25bn revolving credit facility was drawn in April and repaid by year-end.

Outlook, management commentary, risks and unusual items

• FCA withdrew its FY2020 guidance in March 2020; this filing does not provide a clear FY2021 guidance figure. It notes that the separate “2021 Stellantis Guidance” section was omitted from the SEC filing.
• For the fourth quarter, management reported record results, with all FCA segments profitable, North America Adjusted EBIT of €2.2bn and an 11.6% margin, and sequential improvement in LATAM. The filing does not provide a complete set of fourth-quarter consolidated results in the text presented.
• Management estimated annual industrial merger synergies at more than €5bn at steady state, with about 80% expected by the end of 2024 and approximately €4bn of one-time implementation costs. These are expectations, not reported savings; the filing cautions that integration benefits may be delayed or not achieved.
• FY2020 included €927m of impairment expense and supplier obligations, a €222m provision for U.S. Department of Justice investigation matters, and the €549m deferred tax asset write-down. The filing also reports an approximately €200m increase in warranty campaign provisions relating to a planned recall for about 935,000 vehicles with 2.4L Tigershark engines.
• Unresolved diesel-emissions investigations and litigation, product warranty and safety claims, and other legal proceedings could result in further costs. The filing also describes potential CAFE penalties of up to €550m depending on regulatory litigation and future compliance actions.
• FCA’s defined benefit pension plans were underfunded by approximately €4.1bn. Expected 2021 contributions were €1.087bn, including discretionary contributions.
• FCA did not pay the proposed 2019 ordinary dividend in 2020 due to the pandemic. A €2.9bn special distribution was paid in January 2021; a further proposed €1bn distribution was subject to shareholder approval. The planned distribution of legacy PSA’s Faurecia interest was also subject to approval.
• For context only, PSA reported 2020 revenue of €60.7bn, operating income of €3.1bn and 2.5m vehicle sales. These are not part of FCA’s reported consolidated FY2020 results.

Important facts for investors to verify

• How reverse-acquisition accounting, purchase-price allocation and merger costs affect Stellantis’s future reported results and comparability with FCA’s FY2020 figures.
• Whether merger synergies are realized on schedule and how actual savings compare with the approximately €4bn estimated implementation cost.
• The composition and availability of liquidity, debt maturities, facility covenants and any restrictions associated with the Italian-backed financing.
• The outcome and potential financial exposure from emissions matters, the Tigershark recall, CAFE rules and other material litigation or contingencies.
• Approval and payment status of proposed shareholder distributions, including the Faurecia distribution, and any updated dividend or earnings guidance.