Fiat Industrial Cuts 2013 Goals on Iveco’s European SalesTommaso Ebhardt
Fiat Industrial SpA, the truck and tractor maker spun off from car manufacturer Fiat SpA in 2011, cut earnings and sales targets for 2013 as a recession in Europe led to a first-quarter loss at the Iveco vehicle unit.
Revenue will rise as much as 4 percent, compared with a previous forecast of 5 percent, Turin, Italy-based Fiat Industrial said today in a statement. The trading profit margin will amount to 7.5 percent to 8.3 percent of revenue, versus an earlier range prediction of 8.3 percent to 8.5 percent.
Amid a recession in the 17 countries sharing the euro, demand for commercial vehicles in Europe fell for a 15th consecutive month in March. MAN SE, the region’s third-largest producer, lowered its earnings forecast for 2013 on April 26 because of the contraction. Industrywide first-quarter sales of trucks weighing more than 3.5 tons dropped 17 percent to 64,198 vehicles, according to the ACEA trade group.
“The news is clearly negative and not discounted,” said Gabriele Gambarova, an analyst at Banca Akros in Milan. “Iveco encountered more difficult market conditions.”
Fiat Industrial dropped as much as 5.1 percent to 8.59 euros, the biggest intraday decline since March 19, and was trading down 4.7 percent at 4:20 p.m. in Milan, valuing the manufacturer at 10.5 billion euros.
Trading profit, or earnings before interest, taxes and one-time gains or costs, dropped 5.3 percent to 408 million euros from 431 million euros a year earlier, the company said. Earnings missed the 428 million-euro average of four analyst estimates compiled by Bloomberg. The trading margin narrowed to 7 percent of sales from 7.4 percent.
MAN Chief Executive Officer Georg Pachta-Reyhofen said on April 26 that he sees “no signs” of an economic recovery. First-quarter operating profit at the Munich-based company’s commercial-vehicle operations plunged 78 percent to 32 million euros because of losses outside its Brazilian business.
Daimler AG, the global industry leader, posted a 69 percent first-quarter earnings decline at its truck division. Operating profit dropped 92 percent at Volvo AB and 19 percent at the vehicle and services unit of Scania AB.
Iveco reported a first-quarter trading loss of 9 million euros, against profit of 63 million euros a year earlier, because of “lower volumes, a more challenging pricing environment in Europe, capacity ramp-up costs in Brazilian operations and negative exchange rate impacts,” Fiat Industrial said today. Deliveries fell 3.9 percent, led by a 16 percent drop in medium-weight vehicles.
Trading profit at the CNH farm-tractor and construction-equipment division rose 12 percent to 411 million euros as sales increased 0.7 percent to 3.8 billion euros. The Amsterdam-based unit earlier today stuck to its forecasts for the year, including a 5 percent increase of revenue.
“Somewhat surprisingly after CNH reiterated their guidance, Fiat Industrial had to lower guidance for the group, which implies that the weak truck performance is starting to affect the overall operations,” said Erich Hauser, an analyst for Credit Suisse in London. “Iveco is spoiling the party.”
Fiat Industrial and CNH, in which the Italian company holds 88 percent, plan to combine, with the new entity listing its shares in New York as Chairman Sergio Marchionne shifts the manufacturer’s focus to the U.S. from Europe. The new company, which Marchionne has said won’t keep Fiat in its name, will be based in the Netherlands, further reducing ties to Italy.
A “merger with CNH and the New York listing may finally attract the investor attention Fiat Industrial deserves,” Laura Lembke, a London-based analyst at Morgan Stanley, wrote in a report April 19, when she raised her recommendation on the stock to overweight from equal weight. “Fiat Industrial has a robust and structurally growing agricultural business and surprisingly resilient Iveco margins.”
Fiat Industrial plans to begin stock trading in New York in the third quarter, Marchionne said in January. The deal could work as a “technical blueprint” for the combination between Turin-based Fiat and its Chrysler division in the U.S., Marchionne, who is also chief executive officer of the two carmakers, said last year.
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