Financial review - Fiat S.p.A.

The following information is based on the 2013 financial statements prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), as adopted by the European Union, and regulations implementing Article 9 of Italian Legislative Decree 38/2005.

Operating Performance

Fiat S.p.A. reported a loss of €227 million for 2013, compared with a loss of €152 million for the prior year.

The principal components of the income statement were as follows:

(€ million)20132012
Income from investments (3) 68
Dividends 536 1.030
Impairment (losses)/reversals on investments (540) (962)
Gains/(losses) on disposals 1 -
Personnel and operating costs, net of other income (28) (35)
Financial income/(expense) (210) (216)
PROFIT/(LOSS) BEFORE TAXES (241) (183)
Income taxes 14 31
PROFIT/(LOSS) FOR THE YEAR (227) (152)

Income from investments was a negative €3 million for the year (positive €68 million for 2012), with dividends received more than offset by net impairments:

  • Dividends totaling €536 million included €500 million received from Fiat Gestione Partecipazioni S.p.A. (now Fiat Partecipazioni S.p.A.), €23 million from Fiat Finance S.p.A., €5 million from Teksid S.p.A. and €8 million from Fiat Industrial S.p.A. (now CNH Industrial N.V.).

    In 2012, dividends totaling €1,030 million were received from Fiat Gestione Partecipazioni S.p.A. (€1,000 million), Fiat Finance S.p.A. (€24 million) and Fiat Industrial S.p.A. (€6 million).
  • Net impairment on investments of €540 million consisted of a €465 million impairment on the investment in Fiat Gestione Partecipazioni S.p.A. (now Fiat Partecipazioni S.p.A.), aligning the carrying amount with the book value of the investee’s equity following the distribution of reserves to Fiat S.p.A., as well as impairment losses on the investments in RCS MediaGroup S.p.A. (€74 million) and Teksid Aluminum S.r.l. (€17 million), net of a partial reversal for Fiat Partecipazioni S.p.A., now FGA Real Estate Services S.p.A. (€16 million).

    In 2012, net impairments totaled €962 million, consisting of a €933 million impairment on the investment in Fiat Gestione Partecipazioni S.p.A., for the same reason as the adjustment recognized in 2013, as well as impairment losses on the investments in RCS MediaGroup S.p.A. (€35 million) and Teksid Aluminum S.r.l. (€15 million), net of a partial reversal for Fiat Powertrain Technologies S.p.A. (€21 million).
  • Gains on disposals totaled €1 million and related to the transfer of the shareholdings in Fiat Revisione Interna S.c.p.A. and Isvor Fiat S.c.p.A. to Fiat Partecipazioni S.p.A. In 2012, no shareholdings were sold.

Personnel and operating costs, net of other income totaled €28 million, compared with €35 million for 2012.

  • Personnel and operating costs totaled €111 million, compared with €112 million in 2012. A reduction in costs for services and lower notional charges for stock options offset an increase in personnel costs attributable to a higher average headcount (236 employees, compared with 219 in 2012). That increase was primarily due to the acquisition of a business unit from the subsidiary Fiat Services S.p.A. in early 2013.
  • Other income of €83 million (€77 million in 2012) mainly related to services rendered, including by senior management personnel, to the principal Group companies. The €6 million increase over the prior year was mainly due to the increase in services rendered to Group companies, including services provided by the newly-acquired business unit, as well as an increase in reimbursements for the cost of seconded personnel.

Net financial expense, of €210 million, included €241 million in financial charges, relating primarily to interest expense on debt, partially offset by a €31 million gain at expiration on the stock-option related equity swaps on Fiat and CNH Industrial shares. For 2012, net financial expense of €216 million included a €250 million in financial charges offset by the €34 million gain in the mark-to-market of the above equity swaps. The €6 million year‑over‑year decrease was attributable to a more favorable mix of liquidity/debt/interest rates (€9 million), net of the negative difference in the gain on the equity swaps (€3 million).

For income taxes, the Company recognized a €14 million credit for the year (€31 million credit in 2012), which primarily reflected compensation received for losses contributed by Fiat S.p.A. to the domestic tax consolidation for the Group’s Italian companies.

Statement of Financial Position

The principal components of the statement of financial position were as follows:

(€ million)31.12.201331.12.2012
Non-current assets 13,106 11,809
of which: Investments 13,060 11,765
Working capital (220) (261)
NET CAPITAL INVESTED 12,886 11,548
EQUITY 8,693 8,901
NET DEBT 4,193 2,647

Non-current assets consisted almost entirely of shareholdings in the Group’s principal subsidiaries. The €1,295 million increase in investments over 31 December 2012 related primarily to the recapitalization of subsidiaries (€1,738 million, of which €1,650 million for Fiat Group Automobiles S.p.A.), capital subscriptions (€94 million related to the associate company RCS MediaGroup S.p.A.) and fair value revaluation of investments in other companies, net of the €540 million in impairments commented on above.

Working capital was a negative €220 million and consisted of trade receivables/payables, other receivables/payables (from/to tax authorities, employees, etc.), contract work in progress net of advances, and provisions for the period. The €41 million difference over 31 December 2012 mainly reflects changes in the receivable/payable position with subsidiaries arising from the domestic tax consolidation and the consolidated VAT settlement.

Equity totaled €8,693 million at 31 December 2013, a net decrease of €208 million over 31 December 2012, mainly reflecting the €227 million loss for the year, partially offset by gains recognized directly to reserves and other positive items.

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

Net debt totaled €4,193 million at 31 December 2013, representing a €1,546 million increase over year-end 2012 due primarily to recapitalizations and capital subscriptions in investees, net of the dividends commented on above and other cash items. Net debt consisted of the following:

(€ million)31.12.201331.12.2012
Current financial assets, cash and cash equivalents (1) (59)
Current financial liabilities 3,780 1,294
Non-current financial liabilities 414 1,412
NET DEBT/(CASH) 4,193 2,647

Current financial liabilities at 31 December 2013 consisted principally of the following items payable to the subsidiary Fiat Finance S.p.A.:

  • a current account overdraft
  • a short-term €3,000 million loan provided at market terms

At 31 December 2012, current financial assets and liabilities also consisted of receivables and payables from/to the subsidiary Fiat Finance S.p.A. relating to the positive fair value of equity swaps on Fiat and Fiat Industrial shares expiring in 2013, as described above.

Non-current financial liabilities mainly consisted of the loan from Fiat Finance S.p.A., at market rates of interest, which is repayable in 2014.

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

Reconciliation between equity and net profit of the Parent Company and the Group

As required by the Consob Communication of 28 July 2006, the following table provides a reconciliation between the net result and equity of Fiat S.p.A. for the years ended 31 December 2013 and 2012 and the comparable items on a consolidated basis (portion attributable to owners of Fiat S.p.A.).

(€ million)Equity at 31.12.20132013 Profit/(Loss)Equity at 31.12.20122012 Profit/(Loss)
FINANCIAL STATEMENTS OF FIAT S.P.A. 8,693 (227) 8,901 (152)
Elimination of carrying amount of interests in consolidated entities and related dividends (12,761) (528) (11,454)

(1,024)

Elimination of impairment losses (net of reversals) on consolidated entities - 540 - 962
Equity and profit/(loss) of consolidated entities 14,170 1,163 10,501 311
Consolidation adjustments:        
Elimination of intercompany profit/loss on inventories and fixed assets, dividends paid between subsidiaries and other adjustments (1,776) (44) (1,761)
(53)
CONSOLIDATED FINANCIAL STATEMENTS  
(PORTION ATTRIBUTABLE TO OWNERS OF FIAT S.P.A.)
8,326 904 6,187 44