Financial review Fiat SpA

The following information is based on the 2010 financial statements prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union, and with regulations implementing Article 9 of Legislative Decree 38/2005.

OPERATING PERFORMANCE

For 2010, the Parent Company reported net profit of €442 million, a €102 million increase over the prior year.

 

Following is a summary of Fiat S.p.A.’s income statement:

(€ million)   2010 2009
Income from investments   584 402
Dividends   428 1,260
Impairment (losses)/reversals on investments   156 (858)
Gains/(losses) on disposals    -   - 
Personnel and operating costs, net of other income   (83) (42)
Financial income/(expense)   (93) (14)
PROFIT/(LOSS) BEFORE TAXES   408 346
Income taxes   34 (6)
PROFIT/(LOSS) FOR THE YEAR   442 340

 

Income from investments totaled €584 million and consisted of dividends received during the year and net impairment reversals on investments. This represents a €182 million increase over the prior year (€402 million in 2009):

  • Dividends of €428 million related to Fiat Finance S.p.A. (€180 million), Magneti Marelli S.p.A. (€100 million), Fiat Powertrain Technologies S.p.A. (€80 million), Fiat Netherlands Holding N.V. (€50 million) and Business Solutions S.p.A. (€18 million).

    For 2009, a total €1,260 million in dividends were received from Fiat Group Automobiles S.p.A. (€700 million) and Iveco S.p.A. (€560 million);
  • Net impairment reversals on investments of €156 million consisted of a partial reversal of impairment losses on Fiat Gestione Partecipazioni S.p.A. (formerly Iveco S.p.A.) in the amount of €260 million, less impairments recognized on the shareholdings in Fiat Powertrain Technologies S.p.A. (€80 million), Teksid Aluminum S.r.l. (€11 million), Comau S.p.A. (€7 million) and Fiat Industrial S.p.A. (€6 million).

    For 2009, net impairment losses on investments of €858 million related to the shareholdings in Iveco S.p.A. (€560 million), Fiat Group Automobiles S.p.A. (€200 million), Comau S.p.A. (€51 million), Teksid Aluminum S.r.l. (€31 million) and Fiat Partecipazioni S.p.A. (€16 million).

Personnel and operating costs, net of other income totaled €83 million, compared with €42 million for 2009.

 

Specifically:

  • Personnel and operating costs of €145 million, representing a €28 million increase over the prior year primarily attributable to non-recurring expenditures associated with the Demerger and higher non-cash costs related to stock options. For 2010, the Company had an average of 144 employees (152 for 2009).
  • Other income of €62 million (€75 million for 2009) related principally to services rendered, including by senior managers, to other Group companies, and changes in contract work in progress (contracts between Fiat S.p.A. and Treno Alta Velocità – T.A.V. S.p.A., now Rete Ferroviaria Italiana S.p.A.), which are calculated on a percentage completion basis. The €13 million decrease over the previous year was primarily due to lower revenues from contracts with T.A.V. S.p.A. as activities near completion.

Net financial expense totaled €93 million and consisted of €204 million in net financial charges, primarily for interest on financial debt, which was partially offset by a €111 million gain on the mark-to-market value of two stock-option related equity swaps on Fiat S.p.A. ordinary shares. For 2009, there was net financial expense of €14 million consisting of €131 million in financial charges that was largely offset by a €117 million gain on measurement of the above equity swaps. The €79 million increase over the previous year was due to higher interest payments following an increase in debt associated with the recapitalization of subsidiaries.

There was a €34 million credit for income taxes for the year primarily attributable to the contribution of tax losses by Fiat S.p.A. to the tax consolidation for the Group’s Italian companies. For 2009, income taxes totaled €6 million and consisted of IRAP (Italian regional income tax) amounts paid in relation to taxable income for 2008, net of the release of deferred tax provisions related to prior years.

STATEMENT OF FINANCIAL POSITION

Following is a summary of Fiat S.p.A.’s statement of financial position:

(€ million)    31.12.2010  31.12.2009
Non-current assets    11,599
 14,049
of which: Investments    11,423
 13,991
Shareholdings to be demerged    4,977
 -
Working capital    (101)
 (235)
NET CAPITAL INVESTED    16,475
 13,814
EQUITY   12,704
 12,487
NET DEBT   3,771
 1,327

Non-current assets consisted almost entirely of controlling interests in the principal Group companies.

 

Investments decreased €2,568 million over 31 December 2009 as a result of the reclassification of €4,977 million to Shareholdings to be demerged less increases of €2,259 million relating to the recapitalization of subsidiaries, the incorporation and capitalization of shareholdings to be demerged and the net impairment reversals described above.

 

Shareholdings to be demerged, totaling €4,977 million, represents the carrying amount of shareholdings transferred on 1 January 2011 from Fiat S.p.A. to Fiat Industrial S.p.A. pursuant to the Demerger, which consisted of the shareholdings in Fiat Netherlands Holding N.V., Iveco S.p.A., FPT Industrial S.p.A. and Fiat Industrial Finance S.p.A.

 

Working capital was a negative €101 million and consisted of trade receivables/payables, other receivables/payables (from/to tax authorities, employees, etc.), inventoried contract work in progress net of advances, and provisions. The €134 million increase from 31 December 2009 was essentially due to an increase in net receivables/payables from/to subsidiaries for consolidated IRES and an increase in consolidated VAT receivable.

 

Equity totaled €12,704 million at 31 December 2010, a net increase of €217 million over 31 December 2009 principally reflecting profit for the year (€442 million), net of dividends distributed (€237 million).

 

A more detailed analysis of changes in equity is provided in Fiat S.p.A.’s financial statements.

 

Net debt at 31 December 2010 was €3,771 million, up €2,444 million over 31 December 2009 primarily due to the recapitalization of subsidiaries and the incorporation and capitalization of shareholdings to be demerged. Net debt consisted of the following:

(€ million)    31.12.2010   31.12.2009
Current financial assets, cash and cash equivalents    (312)
 (646)
Current financial liabilities    295
 157
Non-current financial liabilities    2,561
 1,816
Net debt to be demerged    1,227
 -
NET DEBT/(CASH)    3,771
 1,327

 

Current financial assets at 31 December 2010 consisted of cash balances held with the subsidiary Fiat Finance S.p.A. and other assets of €115 million, also receivable from Fiat Finance S.p.A., representing the fair value of the cited equity swaps on Fiat S.p.A. ordinary shares.

 

Current financial liabilities at 31 December 2010 primarily consisted of a short-term loan provided at market rates by Fiat Finance S.p.A. and a €122 million liability relating to exercise of the call option on 5% of Ferrari S.p.A. shares.

 

Non-current financial liabilities consisted almost entirely of loans from Fiat Finance S.p.A., at market rates of interest, which are repayable between 2011 and 2013.

 

Net debt to be demerged consists of €1,440 million in loans from Fiat Finance S.p.A. (repayable in 2011 and 2012) net of current financial assets of €213 million representing current account balances held with Fiat Finance S.p.A.

 

A more detailed analysis of cash flows is provided in Fiat S.p.A.’s financial statements.

 

RECONCILIATION BETWEEN EQUITY AND NET PROFIT OF THE PARENT COMPANY AND THE GROUP

Pursuant to the Consob Communication of 28 July 2006, the following table provides a reconciliation between the net profit and equity of Fiat S.p.A. for the year ended 31 December 2010 and the comparable items on a consolidated basis (portion attributable to owners of Fiat S.p.A.):

(€ million)   Equity at 
31.12.2010
Net Profit
2010
Equity at
31.12.2009
Net Profit
2009
FINANCIAL STATEMENTS OF FIAT S.P.A. 
 12,704
 442
 12,487
 340
Elimination of carrying amount of interests in consolidated entities and related dividends    (16,384)
 (428)
 (13,969)
 (1,260)
Elimination of impairment losses (net of reversals) on consolidated entities    -   (156)
 -   858
Equity and profit/(loss) of consolidated entities    16,995
 667
 13,568
 (784)
Consolidation adjustments:          
Elimination of the gain on disposal of the Fiat brand and other adjustments   (880)
 -  (880)
 -
Elimination of intercompany profit/loss on inventories and fixed assets, dividends paid between subsidiaries and other adjustments    (891)
 (5)
 (905)
 8
CONSOLIDATED FINANCIAL STATEMENTS
(PORTION ATTRIBUTABLE TO OWNERS OF FIAT S.P.A.)  
 11,544
 520
 10,301
 (838)

© 2011 FIAT S.p.A - P.IVA 00469580013