Fiat Chrysler Automobiles N.V. — 2017 Form 20-F Summary
Entity and period: The filing is for Fiat Chrysler Automobiles N.V. (FCA), not a company reporting under the Stellantis name in 2017. It is an IFRS annual report for the fiscal year ended December 31, 2017, with comparisons to 2016 and 2015. The financial statements received an unqualified audit opinion.
Financial performance and position
| Metric | 2017 | 2016 | Change or context |
|---|---|---|---|
| Net revenues | €110.9 billion | €111.0 billion | Down 0.1% reported; up 1.0% at constant exchange rates |
| Profit before tax | €6.2 billion | €3.1 billion | Up substantially |
| Net profit from continuing operations | €3.5 billion | €1.8 billion | Net profit attributable to parent owners was €3.49 billion |
| Basic / diluted EPS | €2.27 / €2.24 | €1.19 / €1.18 | Continuing operations |
| Adjusted EBIT | €7.1 billion | €6.1 billion | Adjusted EBIT margin rose to 6.4% from 5.5% |
| Operating cash flow | €10.4 billion | €10.6 billion | Continuing operations |
| Capital expenditures | €8.7 billion | €8.8 billion | Includes €2.6 billion capitalized development spending |
| Cash and cash equivalents | €12.6 billion | €17.3 billion | Available liquidity, including undrawn committed credit lines, was €20.4 billion |
| Total debt | €18.0 billion | €24.0 billion | Reported debt on the balance sheet |
| Net industrial debt | €2.4 billion | €4.6 billion | Management’s non-GAAP measure |
Cost of revenues was €94.0 billion, or 84.7% of revenue, versus 85.8% in 2016. Total assets were €96.3 billion and total equity was €21.0 billion. Defined benefit plans were underfunded by approximately €4.3 billion at year-end. The Board did not recommend a 2017 dividend.
Material changes versus 2016
- Revenue was essentially flat, while consolidated vehicle shipments declined 1.3% to 4.423 million. NAFTA shipments fell 7.2%; LATAM rose 14.3% and EMEA rose 4.5%.
- Adjusted EBIT increased 16.5%, and adjusted margin improved by 90 basis points. Maserati’s adjusted margin increased to 13.8% from 9.7%.
- Net profit increased significantly, reflecting stronger operating results, lower net financial expenses and an €895 million Brazilian indirect-tax liability reversal. Higher tax expense partly offset the improvement.
- Operating cash flow remained strong but decreased modestly. Cash declined by €4.7 billion, including material foreign-exchange translation effects and debt repayments.
- Net industrial debt fell by €2.2 billion to €2.4 billion, primarily due to industrial operating cash flow, partly offset by investment spending.
Outlook, commentary, risks and unusual items
- Outlook: Management reaffirmed its goal of a net industrial cash position by the end of 2018 and expected significant positive operating cash flow in the final year of its 2014–2018 business plan. Planned 2018 capital expenditures were €8.0–€8.5 billion.
- Business and product plans: FCA cited Jeep’s global expansion, localized production, Alfa Romeo launches and NAFTA capacity realignment. On January 11, 2018, it announced a more than $1 billion investment to move next-generation Ram heavy-duty truck production to Michigan in 2020.
- Unusual financial items: The €895 million Brazilian indirect-tax liability reversal increased reported earnings and was excluded from Adjusted EBIT. FCA also wrote off €453 million of Brazilian deferred tax assets due to a slower recovery outlook and recognized an €88 million estimated U.S. tax-reform expense. The filing says the tax-reform estimate could change.
- Legal and regulatory exposure: U.S. and European diesel-emissions investigations and litigation remained unresolved. The U.S. civil complaint concerned about 100,000 model-year 2014–2016 Ram and Jeep diesel vehicles; FCA said it could not reliably estimate probable losses. The company also disclosed U.S. sales-reporting investigations, related securities litigation, product-liability matters and recall risks.
- Other key risks: Profitability is particularly sensitive to U.S. demand for pickups and larger SUVs, which represented about 62% of FCA’s U.S. retail shipments. Other risks include cyclical demand, regulatory compliance costs, supplier disruption, foreign exchange and interest-rate movements, pension funding, and below-investment-grade credit ratings.
- Components: FCA was considering separating part of its Components segment, with a decision expected in the first half of 2018; no outcome was assured.
Most important facts for investors to verify
- Reconcile reported net profit with adjusted measures, particularly the Brazilian tax reversal, deferred-tax write-offs and other excluded items.
- Track the outcome and potential financial impact of diesel-emissions, sales-reporting and product-liability matters; the filing does not provide a reliable loss estimate for key investigations.
- Assess whether the 2018 net-industrial-cash objective and planned €8.0–€8.5 billion of capital expenditures were achieved, alongside working-capital and cash-flow trends.
- Monitor NAFTA truck and SUV demand, shipment volumes, incentives and market share, given the region’s importance to profitability.
- Review debt maturities, liquidity availability, pension funding requirements and the proposed Components separation as subsequent developments.