STLA Stellantis NV

By Eric Sylvers 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 1, 2019).

Fiat Chrysler Automobiles NV surprised investors by confirming its upbeat outlook for this year and reporting relatively strong second-quarter results, even as question marks remain about its future following the failed merger with French rival Renault SA.

The Italian-American company has long lagged behind rivals in areas such as electric vehicles and self-driving technology. Sergio Marchionne, the longtime former chief executive who died a year ago, had focused for years on finding a partner that would ensure the company's long-term viability.

Fiat Chrysler in June looked set to seal a merger with Renault that would have helped both companies confront the financial and technical demands of developing technology. The merger fell apart after the French government and Renault partner Nissan Motor Co. didn't fully back the deal.

Some analysts had been expecting Fiat Chrysler to trim its targets as the global auto market softens and the company continues to struggle in China and Europe.

But the company confirmed financial guidance for this year, including reiterating a forecast of adjusted operating profit of more than EUR6.7 billion and a corresponding profit margin of more than 6.1%. Both would be improvements on last year's results.

Adjusted operating profit, which strips out one-time items, was little changed in the second quarter at EUR1.53 billion ($1.71 billion) compared with the same period last year, the company reported on Wednesday. Revenue dropped 3% in the quarter to EUR26.74 billion.

Strong results in North America, in large part due to the performance of Jeep, which recently began selling the Gladiator truck, as well as Ram, powered earnings in the quarter.

Adjusted operating profit in North America was EUR1.57 billion, more than all other geographic regions combined, and a 12% improvement from the second quarter last year. Profit margin in North America rose by almost a percentage point to 8.9%, even as volume fell 12% and revenue was little changed.

The company is expecting its profit margin in North America to rise to 10% in the second half of 2019 as it sells more high-margin trucks, reduces low-margin fleet sales and cuts industrial costs.

Latin America provided Fiat Chrysler with a small amount of profit. Increased volumes in Brazil offset declines elsewhere in the region, generating an adjusted operating profit of EUR110 million compared with EUR9 million in last year's second quarter.

The Asia Pacific region swung to a small loss in the quarter as deliveries in China fell by a third, while Europe posted a profit of EUR22 million. Persistent disappointing results in the two regions have helped fuel speculation that Fiat Chrysler will continue its search for a merger partner.

Mike Manley, Fiat Chrysler's chief executive, said he has a strong business plan that can be developed without a merger and, while he is open to considering opportunities, the company can flourish on its own.

"Our people and hopefully our shareholders and stakeholders recognize that if we do something, we will only do it if it's in our interests," Mr. Manley told analysts.

Mr. Manley and Fiat Chrysler Chairman John Elkann have touted the company's strengths since the Renault deal fell apart, but many industry watchers expect the Italian-American company will soon try again to seal a deal with a rival auto maker.

Maserati, Fiat Chrysler's luxury brand, continued a string of poor results, reporting a second-quarter loss of EUR119 million as volume plunged by 46%.

Last week, Ford Motor Co. reported flat profit in the second quarter. Like Fiat Chrysler, Ford generates almost all of its profit in North America. Ford also confirmed its profit forecast for this year. General Motors Co. reports earnings Thursday.

Fiat Chrysler's net income from continuing operations rose 14% in the second quarter to EUR793 million, compared with the same period last year

To achieve this year's targets, Fiat Chrysler will have to hit a 6.9% profit margin in the second half of the year, up from 5% in the first six months of the year, according to Jefferies, an investment bank.

Fiat Chrysler shares, little changed before the earnings, jumped after the release and traded up 4.1% at EUR12.18 in afternoon trading in Milan.

Max Bernhard contributed to this article.

Write to Eric Sylvers at eric.sylvers@wsj.com

(END) Dow Jones Newswires

August 01, 2019 02:47 ET (06:47 GMT)

Stellantis NV (BIT:STLA)
Historical Stock Chart
From Mar 2024 to Apr 2024

Stellantis NV (BIT:STLA)
Historical Stock Chart
From Apr 2023 to Apr 2024