Industrial Activities and Financial Services – Results for 2013

Industrial Activities and Financial Services – Results for 2013

In order to provide a better insight into the financial position and performance of the Group and going beyond the requirements of IFRS 8 - Operating segments, the following tables provide a breakdown of the consolidated statements of income, financial position and cash flows between “Industrial Activities” and “Financial Services”. In more detail, the separate evidence of the financial debt between industrial activities and financial services is based on the different sources of cash flows used for the repayment: represented by cash from operations for industrial activities and by collection of financial receivables for financial services. Consequently, a separate analysis of the financial structure in terms of debt to equity and other ratios is considered appropriate.

Financial Services includes companies that provide retail and dealer finance, leasing and rental services in support of the mass-market brands and for the luxury brands.

Financial Services also includes FGA Capital (the joint venture between Fiat Group Automobiles and Crédit Agricole Group), which is accounted for under the equity method.

Basis of analysis

The separation between Industrial Activities and Financial Services represents a sub-consolidation prepared on the basis of the activities of each Group company.

Investments held by companies belonging to one area in companies included in the other area are accounted for under the equity method. To provide a more meaningful presentation of net profit, the results of investments accounted for in this manner are classified in the income statement under Result from intersegment investments.

The holding companies (Fiat S.p.A., Fiat Partecipazioni S.p.A. and Fiat North America LLC) are classified under Industrial Activities.

The sub-consolidation of Industrial Activities also includes companies that provide centralized treasury services for Fiat excluding Chrysler (i.e., raising funds in the market and financing Group companies, with the exception of Chrysler Group LLC and its subsidiaries). Those activities do not, however, include offering financing to third parties.  

N.B.: All Chrysler Group activities are included under Industrial Activities and Chrysler Group’s treasury activities (including funding and cash management) are managed separately from the rest of Fiat Group.

Operating Performance by Activity

 20132012(*)
(€ million)ConsolidatedIndustrialFinancialConsolidatedIndustrial ActivitiesFinancial Services
Net revenues 86,816 86,549 370 83,957 83,66 394
Cost of sales 74,57 74,362 311 71,701 71,527 271
Selling, general and administrative 6,689 6,642 47 6,763 6,719 44
Research and development 2,231 2,231 - 1,85 1,85 -
Other income/(expense) 68 64 4 (102) (113) 11
TRADING PROFIT/(LOSS) 3,394 3,378 16 3,541 3,451 90
Result from investments (**) 97 11 86 107 24 83
Gains/(losses) on disposal of investments  8 8 - (91) (91) -
Restructuring costs 28 28 - 15 15 -
Other unusual income/(expense) (499) (499) - (138) (138) -
EBIT 2,972 2,87 102 3,404 3,231 173
Financial income/(expense) (1,964) (1,964) - (1,885) (1,885) -
PROFIT/(LOSS) BEFORE TAXES 1,008 906 102 1,519 1,346 173
Income taxes (943) (954) 11 623 594 29
PROFIT/(LOSS) 1,951 1,86 91 896 752 144
Result from intersegment investments - 91 - - 144 -
PROFIT/(LOSS) 1,951 1,951 91 896 896 144

(*) Figures for 2012 have been restated to reflect application of the amendment to IAS 19. Compared with the figures previously reported for the Group and for Industrial Activities, restatement resulted in a reduction in net profit of €515 million, reflecting a €273 million increase in operating expense, a €244 million increase in financial expense and a €2 million decrease in income taxes.
(**) Includes income from investments, as well as impairment (losses)/reversals on non-intersegment investments accounted for using the equity method.

Industrial Activities

Net revenues for Industrial Activities totaled €86.5 billion, up 3% over the prior year, with growth in NAFTA and APAC more than offsetting contractions in LATAM and EMEA. Luxury Brands posted a strong year-over-year increase, with Maserati more than doubling over the prior year.

Trading profit totaled €3,378 million for the year (€3,451 million for 2012, restated for IAS 19 as amended). For 2013, R&D amortization was €0.3 billion higher mainly due to new product launches in NAFTA. The reduction in losses for EMEA, strong increase for Luxury Brands – including Maserati’s trading profit more than triple the 2012 level – as well as the positive contribution from Components were more than offset by lower trading profit for NAFTA and LATAM.

Financial Services

Net revenues for Financial Services totaled €370 million for the year, down 6% over 2012 (CER +4%). Trading profit totaled €16 million, compared with €90 million for 2012.

  Revenues Trading Profit
20132012Change(€ million)20132012Change
323 347 -24 Mass-market Brands (LATAM, APAC, EMEA) 3 75 -72
47 47 - Luxury Brands (Ferrari) 13 15 -2
370 394 -24 Total 16 90 -74

Mass-market Brands (LATAM, APAC, EMEA)

The Group offers financial services to support vehicle sales in Europe, Latin America and China directly through its financial services subsidiaries or associates. In other markets, the Group’s sales activities are supported by vendor programs offered jointly with leading partner banks.

In Europe, financial services are provided by FGA Capital, a 50/50 joint venture with the Crédit Agricole Group (accounted for under the equity method). FGA Capital supports the Group’s sales activities through dealer financing, retail financing and medium and long-term rental. The collaboration with Crédit Agricole has produced results that are in line with expectations and meet the Group’s commercial needs. During the year, the two partners renewed the agreement (ahead of scheduled expiry date) for a further 8 years (2021).

New financing to the dealer network totaled €12,787 million (€13,292 million in 2012).

Retail financing (which this year also includes finance leases) was provided on 439,343 vehicles, representing a financed value of €7,163 million and a penetration rate of 26% on Group sales (2012: 387,800 vehicles, financed value of €6,015 million and 21% penetration rate of sales for Group brands).

There were new medium and long-term rental agreements on 54,768 vehicles, representing a financed value of €647 million and a penetration rate of 5.2% on Group sales (2012: 53,643 rental agreements, financed value of €632 million and 4.8% penetration rate of sales for Group brands).

In Italy, Fidis S.p.A. (a wholly-owned subsidiary of Fiat Group Automobiles S.p.A.) also manages a factoring portfolio and issues guarantees on behalf of Fiat Group.

For Latin America and China, dealer and retail financial services are provided by Banco Fidis in Brazil, Fiat Crédito Compañía Financiera in Argentina and Fiat Automotive Finance in China. All three companies are subsidiaries of Fidis S.p.A. and, in addition to their principal activities in support of the FGA and Chrysler networks, they also provide financing to customers and the dealer networks of Iveco, CNH and, in China, their joint ventures.

The average managed portfolio of Fidis and its subsidiaries was €3,157 million (€2,963 million in 2012), of which €1,473 million was dealer financing, essentially in Brazil (€1,304 million in 2012), and €778 million end-customer financing (€945 million in 2012).

In 2013, revenues for the Financial Services companies that support the sales activities of the Mass-market Brands were down 7% in nominal terms. On a constant currency basis, however, there was a 4% increase over 2012, primarily due to an increase in the average portfolio in Brazil and Argentina.

Trading profit totaled €3 million. The decrease over the €75 million profit for 2012 was mainly attributable to an increase in bad debt provisions in APAC and LATAM.

Luxury Brands (Ferrari)

Ferrari Financial Services (“FFS”) provides car financing to customers in Europe, North America and Japan through its subsidiaries FFS S.p.A. (Italy), FFS AG (Germany, U.K., Switzerland, France, Belgium and Austria), FFS Inc. (U.S. and Canada) and FFS KK (Japan). The Japanese subsidiary began offering car finance and leasing services to retail customers in July 2013.

The financial services companies also offer financing to dealers in Europe (Germany, Switzerland, Belgium, U.K. and Italy) and Japan.

At the commercial level, penetration in Europe was 43% (41% in 2012) and in North America 41% (40% in 2012).

For 2013, total new finance agreements were up 3% in volume terms to 3,003 and 19% in value terms to €556 million.

At 31 December, the total value of the portfolio was €768 million (Italy 6%, Rest of Europe 38%, USA 55% and Japan 1%).

FFS reported consolidated revenues of €47 million, in line with 2012. Trading profit totaled €13 million, a decrease of €2 million over the prior year mainly attributable to an increase in the cost of funding.

Statement of Financial Position by Activity

 31.12.201331.12.2012(*)
(€ million)ConsolidatedIndustrial ActivitiesFinancial ServicesConsolidatedIndustrial ActivitiesFinancial Services
Intangible assets 19,509 19,502 7 19,284 19,279 5
Property, plant and equipment 22,843 22,84 3 22,061 22,058 3
Investments and other financial assets 2,26 2,657 863 2,287 2,756 787
Leased assets 1 1 - 1 1 -
Defined benefit plan assets 105 105 - 93 93 -
Deferred tax assets 2,893 2,826 67 1,738 1,677 61
Total non-current assets 47,611 47,931 940 45,464 45,864 856
Inventory 10,23 10,222 8 9,295 9,29 5
Trade receivables 2,406 2,394 24 2,702 2,69 20
Receivables from financing activities 3,671 1,58 3,685 3,727 1,6 3,643
Current taxes receivable 291 289 6 236 237 6
Other current receivables 2,302 2,248 56 2,163 2,131 32
Current financial assets: 815 788 29 807 724 83
Current investments 35 35 - 32 32 -
Current securities 247 219 28 256 173 83
Other financial assets 533 534 1 519 519 -
Cash and cash equivalents 19,439 19,239 200 17,657 17,411 246
Total current assets 39,154 36,76 4,008 36,587 34,083 4,035
Assets held for sale 9 9 - 55 55 -
TOTAL ASSETS 86,774 84,7 4,948 82,106 80,002 4,891
Equity 12,584 12,584 1,264 8,369 8,369 1,256
Provisions: 17,36 17,345 15 20,276 20,254 22
Employee benefits 8,265 8,259 6 11,486 11,481 5
Other provisions 9,095 9,086 9 8,79 8,773 17
Debt: 29,902 27,998 3,498 27,889 25,933 3,472
Asset-backed financing 596 156 440 449 52 397
Other debt 29,306 27,842 3,058 27,44 25,881 3,075
Other financial liabilities 137 135 4 201 198 3
Trade payables 17,235 17,225 20 16,558 16,546 20
Current taxes payable 314 300 19 231 223 15
Deferred tax liabilities 278 272 6 801 795 6
Other current liabilities 8,943 8,82 122 7,781 7,684 97
Liabilities held for sale 21 21 - - - -
TOTAL EQUITY AND LIABILITIES 86,774 84,7 4,948 82,106 80,002 4,891

(*) Figures for 2012 Annual Report have been restated to reflect application of the amendment to IAS 19 – Employee Benefits. Compared with the figures published in the 2012 financial statements, there was a €4,804 million reduction in equity for the Group and for Industrial Activities and a €2 million reduction for Financial Services.

Net Debt by Activity

  31.12.2013 31.12.2012
(€ million) ConsolidatedIndustrial ActivitiesFinancial ServicesConsolidatedIndustrial ActivitiesFinancial Services
Debt:   (29,902) (27,998) (3,498) (27,889) (25,933) (3,472)
Asset-backed financing        (596) (156) (440) (449) (52) (397)
Other debt   (29,306) (27,713) (1,593) (27,44) (25,79) (1,65)
Intersegment financial payables   - (129) (1,465) - (91) (1,425)
Current financial receivables from jointly-controlled financial services companies (a) 27 27 - 58 58 -
Intersegment financial receivables   - 1,465 129 - 1,425 91
Debt, net of intersegment and current financial receivables from jointly-controlled financial services companies   (29,875) (26,506) (3,369) (27,831) (24,45) (3,381)
Other financial assets (b) 533 534 1 519 519 -
Other financial liabilities (b) (137) (135) (4) (201) (198) (3)
Current securities   247 219 28 256 173 83
Cash and cash equivalents   19,439 19,239 200 17,657 17,411 246
Net (debt)/cash   (9,793) (6,649) (3,144) (9,6) (6,545) (3,055)

(a) Includes current debt payable by FGA Capital to other Fiat Group companies.

(b) Includes fair value of derivative financial instruments.

Net Debt by Activity for Fiat excluding Chrysler

  31.12.201331.12.2012 
(€ million) Fiat excluding ChryslerIndustrial Activities excluding ChryslerFinancial ServicesFiat excluding ChryslerIndustrial Activities excluding ChryslerFinancial Services
Debt:   (20,451) (18,545) (3,498) (17,586) (15,63) (3,472)
Asset-backed financing        (596) (156) (440) (449) (52) (397)
Other debt   (19,855) (18,262) (1,593) (17,137) (15,487) (1,65)
Intersegment financial payables   - (127) (1,465) - (91) (1,425)
Current financial receivables from jointly-controlled financial services companies (a) 27 27 - 58 58 -
Intersegment financial receivables (b) 86 1,549 129 - 1,425 91
Debt, net of intersegment and current financial receivables from jointly-controlled financial services companies   (20,338) (16,969) (3,369) (17,528) (14,147) (3,381)
Other financial assets (c) 436 437 1 474 474 -
Other financial liabilities (c) (116) (114) (4) (159) (156) (3)
Current securities   247 219 28 256 173 83
Cash and cash equivalents   9,763 9,563 200 8,854 8,608 246
Net (debt)/cash   (10,008) (6,864) (3,144) (8,103) (5,048) (3,055)

(a) Includes current debt payable by FGA Capital to other Fiat Group companies.
(b) Includes amounts receivable from Chrysler relating to intragroup manufacturing agreements classified as finance leases in accordance with IFRIC 4 – Determining Whether an Arrangement Contains a Lease.
(c) Includes fair value of derivative financial instruments.

Debt, cash and other financial assets/liabilities pertaining to Financial Services entities are not included in the calculation of Net Debt for Industrial Activities. In addition to their other activities, treasury companies of Fiat excluding Chrysler raise funds for consolidated Financial Services companies by incurring debt on their behalf and
on-lending it to those companies. Loans from the treasury companies of Fiat excluding Chrysler (which are included in Industrial Activities) to the consolidated Financial Services companies are included under intersegment financial receivables and are deducted in the calculation of net debt for Industrial Activities.

Intersegment financial receivables for Financial Services companies, on the other hand, represent deposits with Group treasury as well as advances to industrial companies – for receivables sold to Financial Services companies that do not meet the derecognition requirements of IAS 39 – Financial Instruments: Recognition and Measurement.

Net debt for Financial Services companies at 31 December 2013 was up €89 million over year-end 2012 to €3,144 million. A €499 million increase in the managed portfolio and €16 million in dividends paid to industrial companies were largely offset by €93 million in cash from operating activities and €334 million in positive currency translation differences.

Change in Net Industrial Debt(1)

 20132012 (*)
(€ million)FiatChryslerFiat excluding ChryslerFiatChryslerFiat excluding Chrysler
Net industrial debt at beginning of year (6,545) (1,497) (5,048) (5,529) (3,080) (2,449)
Profit/(loss) 1,951 2,392 (441) 896 1,944 (1,048)
Depreciation and amortization 4,572 2,273 2,299 4,132 2,017 2,115
Changes in provisions and other changes (475) 204 (679) 617 65 (36)
Cash from/(used in) operating activities before change in working capital 6,048 4,869 1,179 5,645 4,614 1,031
Change in working capital 1,464 335 1,129 694 1,275 (581)
Cash from/(used in) operating activities 7,512 5,204 2,308 6,339 5,889 450
Investments in property, plant and equipment and intangible assets  (7,433) (3,573) (3,860) (7,530) (4,311) (3,219)
Cash from/(used in) operating activities, net of capital expenditure 79,0 1,631 (1,552) (1,191) 1,578 (2,769)
Change in consolidation scope and other changes (183) 125 (308) 292 45 247
Net industrial cash flow (104) 1,756 (1,860) (899) 1,623 (2,522)
Capital increases and dividends (3) (6) 3 (36) - (36)
Currency translation differences 3 (38) 41 (81) (40) (41)
Change in net industrial debt (104) 1,712 (1,816) (1,016) 1,583 (2,599)
Net industrial (debt)/cash at end of year (6,649) 215 (6,864) (6,545) (1,497) (5,048)

(*) Figures for 2012 Annual Report have been restated to reflect application of the amendment to IAS 19 – Employee Benefits. Compared with the figures published in the 2012 financial statements, net profit was reduced by €515 million, of which €508 million related to Chrysler and €7 million to the Industrial Activities of Fiat excluding Chrysler. Corresponding increases were recognized under “Changes in provisions and other changes”. 

Net industrial debt increased €104 million for the year with €1.7 billion in cash generation for Chrysler almost fully compensating cash absorption for Fiat excluding Chrysler. Net of equity investments, the Group generated approximately €0.1 billion in cash.

For Chrysler, there was a positive difference of €1,712 million, reflecting €5,204 million in cash from operating activities and €3,573 million in capital expenditure for the year.

For Fiat excluding Chrysler, net industrial debt increased by €1,816 million, reflecting capital expenditure (€3,860 million compared with €3,219 million in 2012) and equity investments and the change in scope of consolidation (included under “Change in consolidation scope and other changes”), which were only partially compensated for by the €2,308 million cash generated from operating activities during the year.

(1) See “Key Performance Indicators” for a description of this measure.

Statement of Cash Flows by Activity

   20132012
(in milioni di euro) ConsolidatedIndustrial ActivitiesFinancial ServicesConsolidatedIndustrial ActivitiesFinancial Services
A) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR   17,657 17,411 246 17,526 17,429 97
B) CASH FROM/(USED IN) OPERATING ACTIVITIES:              
  Profit/(loss)   1,951 1,951 91 896(*) 896(*) 144
  Amortization and depreciation   4,574 4,572 2 4,134 4,132 2
  (Gains)/losses on disposal of non-current assets
and other non-cash items
(a) 545 436 18 667(*) 556(*) (33)
  Dividends received   92 108 - 89 103 -
  Change in provisions   444 450 (6) 77 90 (13)
  Changes in deferred taxes   (1,578) (1,562) (16) (72) (73) 1
  Changes relating to buy-back commitments (b) 92 92 - (51) (51) -
  Changes related to operating leases   1 1 - (10) (8) (2)
  Change in working capital   1,468 1,464 4 714 694 20
  TOTAL   7,589 7,512 93 6,444 6,339 119
C) CASH FROM/(USED IN) INVESTING ACTIVITIES:              
  Investments in:              
  Property, plant and equipment and intangible assets (net of vehicles leased out)   (7,440) (7,433) (7) (7,534) (7,530) (4)
  Subsidiaries and other equity investments   (231) (231) - (24) (26) -
  Proceeds from the sale of non-current assets   48 47 - 139 139 -
  Net change in receivables from financing activities   (449) 50 (499) (24) (27) 3
  Change in current securities   (10) (57) 47 (64) (24) (40)
  Other changes   (4) (135) 131 (30) 11 (41)
  TOTAL   (8,086) (7,759) (327) (7,537) (7,457) (82)
D) CASH FROM/(USED IN) FINANCING ACTIVITIES:              
  Net change in debt and other financial assets/liabilities   3,191 2,960 231 1,679 1,536 143
  Increase in share capital   4 4 - 22 22 2
  Dividends paid   (1) (1) (16) (58) (58) (14)
  Payment of tax withholdings on behalf of shareholders of companies outside Italy   (6) (6) - - - -
  TOTAL   3,188 2,957 215 1,643 1,500 131
  Currency translation differences   (909) (882) (27) (419) (400) (19)
E) NET CHANGE IN CASH AND CASH EQUIVALENTS   1,782 1,828 (46) 131 (18) 149
F) CASH AND CASH EQUIVALENTS AT END OF YEAR   19,439 19,239 200 17,657 17,411 246

(*) Figures for 2012 have been restated to reflect application of the amendment to IAS 19. For both the Group and Industrial Activities, profit was reduced by €515 million, with a corresponding increase in “(Gains)/losses on disposal of non-current assets and other non-cash items”.
(a) Includes reversal of gains in the fair value of equity swaps on a basket of Fiat S.p.A. and CNH Industrial N.V. shares of €27 million for 2013 and €31 million for 2012.
(b) Cash from vehicles sold under buy-back commitments for the periods reported above, net of amounts already recognized through profit and loss, is included in a separate line item under operating activities, which also includes change in working capital.

Industrial Activities

For 2013, Industrial Activities generated cash and cash equivalents of €1,828 million.

  • Operating activities generated €7,512 million in cash, of which €5,204 million was attributable to Chrysler. Excluding Chrysler, Industrial Activities generated €2,308 million in cash, consisting of €1,179 million in income-related cash flows and a €1,129 million decrease in working capital.
  • Investing activities absorbed a total of €7,759 million, including €7,433 million for investments in tangible and intangible assets (of which €3,573 million related to Chrysler) and €231 million for equity investments, in addition to funding provided to financial services companies (included under other changes).
  • Financing activities generated €2,957 million in cash, consisting primarily of a net increase in borrowings (approximately €1.9 billion in bonds and €1 billion in other debt).

Financial Services

Cash and cash equivalents for Financial Services totaled €200 million at 31 December 2013, down €46 million over the beginning of the year.

Changes in cash were attributable to:

  • Operating activities, which generated €93 million in cash (net profit plus amortization and depreciation).
  • Investing activities (including changes in financial receivables from and debt payable to industrial companies), which absorbed €327 million in cash, primarily relating to an increase in the lending portfolio net of loans from treasury companies (included under other changes) and a decrease in current securities.
  • Financing activities, which generated a total of €215 million, consisting of €231 million of net inflows from new financing, less dividends paid to companies included under Industrial Activities (€16 million).