Financial review Fiat SpA

The following information is based on the 2012 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

For 2012, Fiat S.p.A. reported a loss of €152 million, compared with a profit of €99 million for 2011.

The principal components of the income statement were as follows:

(€ million) 2012 2011
Income from investments 68 560
Dividends 1,030 388
Impairment (losses)/reversals on investments (962) 157
Gains/(losses) on disposals - 15
Personnel and operating costs, net of other income (35) (70)
Financial income/(expense) (216) (435)
PROFIT/(LOSS) BEFORE TAXES (183) 55
Income taxes 31 44
PROFIT/(LOSS) FOR THE YEAR (152) 99

Income from investments totaled €68 million (€560 million for 2011) and consisted of dividends received for the year and net impairments:

  • 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).
    In 2011, dividends totaling €388 million were received from Ferrari S.p.A. (€180 million), Fiat Gestione Partecipazioni S.p.A. (€180 million) and Fiat Finance S.p.A. (€28 million).
  • Net impairments on investments of €962 million consisted of a €933 million impairment recognized on the investment in Fiat Gestione Partecipazioni S.p.A., to realign the carrying amount of the investment with the book value of its equity following the distribution of reserves to Fiat S.p.A., as well as impairment losses recognized on the investments in RCS MediaGroup S.p.A. (€35 million) and in Teksid Aluminium S.r.l. (€15 million), net of a partial reversal for Fiat Powertrain Technologies S.p.A. (€21 million).
    In 2011, net reversals on investments of €157 million consisted of a full reversal of impairment losses previously recognized on Fiat Gestione Partecipazioni S.p.A. (totaling €352 million), less impairment losses recognized on the holdings in Comau S.p.A. (€147 million) and Teksid Aluminum S.r.l. (€48 million).
  • For 2012, there were no gains/(losses) on disposals. For 2011, gains on disposals totaled €15 million and related to gains realized on the shareholdings in Fiat Switzerland S.A. (sold to CNH International S.A.) and Fiat Finance North America Inc. (sold to Fiat Finance and Trade Ltd. S.A.).

Personnel and operating costs, net of other income totaled €35 million, compared with €70 million for 2011.

  • Personnel and operating costs of €112 million were substantially in line with the prior year (€115 million in 2011). A reduction in costs for services and notional charges on stock options offset higher personnel costs attributable to an increase in headcount. For 2012, the Company had an average of 219 employees (104 for 2011). The increase of 115 was primarily due to the transfer of business units from the subsidiaries Fiat Revisione Interna S.c.p.A. and Fiat Finance S.p.A. at the end of 2011.
  • Other income of €77 million (€45 million in 2011) principally related to services rendered, including by senior management personnel, to the principal Group companies. Compared to the prior year, the increase of €32 million was primarily due to the increase in services rendered to Group companies, including the activities of the business units acquired in 2011.

Net financial expense totaled €216 million, which included €250 million in financial charges, relating primarily to interest expense on debt, partially offset by income of €34 million arising from the fair value measurement of stock-option related equity swaps on Fiat and Fiat Industrial shares. For 2011, net financial expense totaled €435 million, which included €327 million in financial charges, relating primarily to interest expense on debt, in addition to a €108 million loss arising from the fair value measurement of the above equity swaps. The €219 million decrease in net financial expense over 2011 was attributable to the swing in value of the equity swaps (€142 million), as well as a reduction in costs associated with the lower average level of indebtedness (€77 million).

For income taxes, the Company recognized a €31 million credit for the year (€44 million in 2011), which was primarily attributable to compensation received for tax losses contributed by Fiat S.p.A. to the national 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) 31.12.2012 31.12.2011
Non-current assets 11,809 12,169
of which: Investments 11,765 12,123
Working capital (260) (253)
NET CAPITAL INVESTED
11,549 11,916
EQUITY
8,902 9,053
NET DEBT
2,647 2,863

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

The €358 million decrease in investments over 31 December 2011 was primarily attributable to the net effect of impairments and reversals on investments (€962 million) commented on above, net of the recapitalization of certain subsidiaries (€444 million) and acquisition of additional interests in subsidiaries (€131 million), in addition to the fair value revaluation of investments in other companies.

Working capital was a negative €260 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 €7 million decrease over 31 December 2011 mainly reflects the receivable/payable position with subsidiaries and tax receivables for consolidated IRES income taxes.

Equity totaled €8,902 million at 31 December 2012, a reduction of €151 million over year-end 2011 primarily due to the loss for the year (€152 million) and dividends (€40 million), partially offset by the fair value revaluation of investments in other companies.

A more detailed analysis of changes in equity is provided in the statutory financial statements for Fiat S.p.A.

Net debt totaled €2,647 million at 31 December 2012, a reduction of €216 million over year-end 2011, primarily attributable to dividends received, net of recapitalization and acquisition of additional interests in subsidiaries, as commented on previously, and other cash outflows. Net debt consisted of the following:

(€ million)  31.12.2012 31.12.2011
Current financial assets, cash and cash equivalents (59) (375)
Current financial liabilities 1,294 1,075
Non-current financial liabilities 1,412 2,163
NET DEBT/(CASH)
2,647 2,863

Current financial assets at 31 December 2012 consisted mainly of receivables from the subsidiary Fiat Finance S.p.A. relating to the positive fair value of two equity swaps on Fiat and Fiat Industrial ordinary shares.

Current financial liabilities at 31 December 2012 consisted principally of the following items payable to the subsidiary Fiat Finance S.p.A.:

  • a current account overdraft
  • a short-term loan for €900 million provided at market rates
  • liabilities representing the negative fair value of the remaining equity swaps on Fiat and Fiat Industrial ordinary shares

Non-current financial liabilities consisted almost entirely of loans from Fiat Finance S.p.A., at market rates of interest, which are repayable in 2013 and 2014.

A more detailed analysis of cash flows is provided in the statutory financial statements for Fiat S.p.A.

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 2012 and 2011 and the comparable items on a consolidated basis (portion attributable to owners of Fiat S.p.A.):

(€ million) Equity at
31.12.2012
2012
Profit/(Loss)
Equity at
31.12.2011
2011
Profit/(Loss)
FINANCIAL STATEMENTS OF FIAT S.P.A. 8,902 (152) 9,053 99
Elimination of carrying amount of interests in consolidated entities and related dividends (11,454) (1,024) (11,700) (388)
Elimination of impairment losses (net of reversals) on consolidated entities - 962 - (157)
Equity and profit/(loss) of consolidated entities 13,372 615 13,111 1,805
Consolidation adjustments:        
Elimination of intercompany profit/loss on inventories and fixed assets, dividends paid
between subsidiaries and other adjustments
(1,761) (53) (1,737) (25)
CONSOLIDATED FINANCIAL STATEMENTS (PORTION ATTRIBUTABLE TO OWNERS OF FIAT S.P.A.) 9,059 348 8,727 1,334

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