Fiat cuts 2013 financial targets as LatAm disappoints

Reuters

By Bernie Woodall and Jennifer Clark

DETROIT/MILAN, Oct 30 (Reuters) - Italian automaker Fiat cut its 2013 financial targets on Wednesday as athird-quarter revenue slump in crucial Latin American marketsoffset a strong performance at Chrysler, the No.3 U.S. automakerit controls.

Fiat slashed the bottom end of its trading profit forecastto 3.5 billion euros ($4.8 billion) from 4.0 billion euros,saying that its third-quarter earnings took an 80 million eurohit from a weak Brazilian real.

Its trading profit - earnings before interest, tax andone-time items - in Latin America tumbled to 165 million eurosin third quarter from 341 million euros a year ago.

Analysts were expecting a poor performance in Brazil, whichusually accounts for about a quarter of Fiat's trading profit,because of the strong euro and the end of car sales incentives,but were surprised by the extent of the outlook cut.

They had pencilled in a full-year trading profit forecastcut to as low as 3.65 billion euros, according to a consensuspublished on Fiat's website.

As a result of the deeper-than-expected cut, Fiat's sharesplummeted 5.7 percent in Milan after the earnings statement.

Fiat cut revenue guidance for the full year to about 88billion euros, at the bottom of its previous range. It said itnow sees trading profit at between 3.5 billion and 3.8 billioneuros - placing the top end of its forecast in line with lastyear's figure of 3.81 billion euros.

Full-year net profit is now expected in the 900 million-1.2billion euro range, well below last year's 1.4 billion euros.

However, its net loss in Europe - where mass market carmakers are struggling with the lowest sales in 20 years -narrowed to 165 million euros in the third quarter. Last yearFiat lost 704 million euros in Europe.

The third-quarter earnings of both Fiat and Chrysler arebeing watched by analysts as an indication of the value Chryslercould fetch should an initial public offering (IPO) slated forearly next year go ahead.

The stock market listing will take place if Fiat cannotresolve a dispute with a union-affiliated healthcare trust,which owns 41.5 percent of Chrysler, over the value of it stake.

CHRYSLER RESULTS BETTER THAN EXPECTED

Chrysler, which Fiat has controlled since 2009, said its netrevenue rose 13.5 percent to $17.6 billion in the quarter, asstrong sales of its pickup trucks and Jeep Grand Cherokee helpedoffset a delay in sales for the Jeep Cherokee.

Some analysts had been predicting that the Jeep Cherokeelaunch delay would hurt third-quarter results. The Cherokeebegan shipping to dealers last week.

Chrysler net profit for the third quarter rose 22 percent to$464 million. It confirmed its full-year sales forecast of $72billion to $75 billion.

The company said it had shipped 593,000 vehicles in thequarter, up 6 percent from a year earlier.

The company's share of the U.S. market fell to 11.2 percentfrom 11.3 percent a year ago.

Richard Hilgert, analyst with Morningstar, said he is notconcerned about the loss of market share "because they didn'thave the Cherokee and they had the Liberty adding to their saleslast year."

The Jeep Liberty is the vehicle Cherokee replaces in theChrysler lineup. Hilgert pointed out that fourth-quarter'svehicle sales and earnings will likely be boosted in comparisonwith a year earlier because the decline in Liberty sales beganin late 2012.

Chrysler's cash at the end of the quarter was $11.5 billion,compared with $11.9 billion at the end of the second quarter.

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