As the successive adjunct to a previous detailing of Q1
positioning, below are the continued summaries and analysis
commentary to date from most recently availed Q2 reports.
Provided
relative to the respective release schedule below:
Previously
-
Daimler:
23.07.2014
GM:
24.07.2014
Ford: 24.07.2014
Hyundai 24.07.2014
Herein
-
Honda 29.07.2014
Renault 29.07.2014
Peugeot 30.07.2014
FIAT-Chrysler
30.07.2014
To
Come -
Volkswagen 31.07.2014
BMW 05.08.2014
Toyota 05.08.2014
Honda
-
(Q1
2015 = Q2 2014)
Unit
Sales
Group
Level: 6.708m (across motorcycyles, cars, power products)
Consolidated:
4.862m (across motorcycles, cars, power products)
Revenue
Group
Level n/a
Consolidated ¥2,988.2bn
(+5.4%)
EBIT
Group
Level n/a
Consolidated ¥198bn
(+7.6%)
Net
Income
Group
Level n/a
Consolidated
¥146.5bn (+19.6%)
EPS
(ord) ¥81.29 (+¥13.32)
Net
Liquidity ¥1,084.4bn (-5.6%)
Operating
C-F ¥58bn (EBIT - ¥140bn
CapEx)
Free
Cash Flow ¥13.5bn
Profit
Margin 6.6%
Headlines:
-
EBIT gains driven by volume and model mix
-
boosted by replacement and all new model launches in Japan and Asia
-
positive FX impact of weaker Yen vs US$ and €
-
overhead cost-down exercises
-
increases in SG/A costs
-
increase in depreciation charges for new plant start-up
-
CapEx reduced by 18,2% yoy
By
Division:
Geographically,
Honda saw its operating income and margins in Japan remain flat, that
of N. America contract, Europe substantially improve but just below
break-eve, Asia improve substantially and ROW decline.
Motorcycles
-
At
the Group Level 4.137m units (+2%), whilst at Consolidated Level
2.457m units (+3.6%). Revenue ¥407.7bn,
EBIT ¥ 43.9bn (+3.3%), Operating Margin 10.8% (from 10.7)
Sales
in Japan dropped to 48k units (from 54k the previous year), N.
America was flat at 62k yoy, Europe up to 60k (from 52k), Asia up to
3,593k (from 3,479), RoW down to 374k (from 407k).
India
proved the greatest demand driver, with the well entrenched Activa,
CB Shine and Dream Yuga selling well. However other EM regions such
as Thailand, Africa and S. America saw sales falls. Capital
Expenditure fell to ¥8.8bn (from
¥12.5bn a year previously)
Cars
-
At
the Group Level 1.061m units (+6.2%), Consolidated Level 0.895m units
(up +4.3%).
Revenue
¥2,319.5bn, EBIT ¥99.8bn
(+3.6%), Operating Margin 4.3%
Sales
in Japan grew well to 202k units (from 140k a year previous), N.
America contracted -3% to 445K (from 459k), Europe flat at 40k yoy,
Asia at 316k (from 285k), RoW down to 58K (from 75k).
The
cross-segment effects of a remodelled Fit (Jazz) B-segment car and
Odyssey mid-size MPV plus all new N-WGN kei car and Vezel cross-over
boosted Japanese sales, whilst D-segment CRIDER sedan and Jade
estate/wagon was favoured in China.
CapEx
reduced to ¥129.8bn (from
¥155.4bn)
Power
Products -
At
the Group Level 1.51m units (-5%), Consolidated Level likewise.
Revenue
¥77bn, EBIT ¥2.3bn (+77%),
Operating Margin 3.1 %
Generally,
an increase of small engine sales to OEMs in Japan as prime component
parts for various applications at 68k units (from 63k), but decrease
for similar in N. America at 773k (from 828k), and a decrease in
engine sales for agricultural uses across Thailand and Indonesia,
creating Asian contraction at 336k (from 364k).
CapEx
reduced to ¥1.8bn (from
¥3.3bn)
Financial
Services -
At
the Group Level the full vale of total subsiduary inclusive assets
rose to ¥8,009bn (+ 11%).
Revenue
¥189.3bn (+12.5%, EBIT ¥51.8bn
(+16.1%), Operating Margin 27.4%
CapEx
grew to ¥0.1bn (from ¥0bn
a year previously)
Announced
Outlook:
Honda
Motor views the FY2015 financial year (running March '14 to March
'15) as promising the following: net sales ¥12,800bn
(+8.1%), EBIT ¥755bn (+3.6%), operating margin of 6%, equity income
of affiliates ¥155bn (+17%), net income ¥600bn (+4.5%), EPS ¥332.91
(up ¥14.37).
This
based upon essentially flat cross-divisional sales: Motorcycles
-0.9%, Cars flat 0% and Power Products -0.2%.
Analysis:
Like
all Japanese auto-makers, Honda has sought to re-orientate itself
toward the advantages of pan-Asian market expansion. This seen by the
manner in which specific model names (City and Mobilio specifically)
have been applied to enlarged vehicle packages from over successive
generations so as to move lock-step with improved populace purchasing
power and desire for enlarged size and comfort from small city cars
to sub-compacts
India's
previous upward market dynamic from the Suzuki Alto based Maruti 600
to newer larger models reflective of the general pan SE Asian trend,
yet recognised as within the lower-cost category. This seen by
Honda's 'dedication' of the new sub-compact Mobilio 7-seat
estate/wagon for Indonesia (derived from the Brio), even if
intentionally priced at the higher end of 'lower-cost'.
Though
somewhat blighted by the damaging sales reduction impact of the
previous geo-political impact of the 'island tensions' in 2013, the
present dispersal of the military concern has buoyed important China
market sales.
However,
N. America obviously still retains market importance, especially so
at present. Thus Honda has chosen to be more brazen about pricing
elasticity on run-out models such as 'old' Accord, seeking to boost
volume sales in a still value conscious market versus Camry, Fusion,
Malibu and Chrysler 200. Beyond pricing regards product function
added-value, Honda has sought the provision of low cost 'lifestyle
solutions'. The 2014/5 Odyssey Minivan is fitted with an optional
stow-away vacuum cleaner within a rear internal trunk panel: a simple
but very effective USP that recognises the lifestyle and profession
requirements of its users, from that of young families' to
courtesy-car drivers.
As
for Honda's executive presented FY2015 'outlook' of essentially flat
overall sales expectation appears slightly conservative. This given
the slightly more subdued but still healthy uptick in N.America, a
well managed “soft landing” at 7.5% growth in China and what
looks to be a well executed effort to re-align corporate transitions
(and new enterprise opportunity) away from state-power links, which
in turn bodes well for the pan-Asian supply chain and so pan-Asian
economies.
However,
slightly greater confidence is shown within the financial forecast,
with Revenue +8.1%, EBIT + 3.6% and Net Income +4.6%. Furthermore the
overall reduction in CapEx, Depreciation and Research/Development
should conserve ¥26bn.
Renault
-
(only
H1 figures reported,
so,
calculated as H1 - Q1 = Q2)
Unit
Sales 729,759 (1,365,998 - 636,239) [H1 +4.7%]
Revenue €11.56bn
(€19.820bn - €8.257bn) [H1 -3%]
EBIT €0.232bn
avg (€0.464bn / 2 quarters) [H1 +270% approx]
Net
Income €0.4005bn avg (€0.801bn / 2 quarters) [H1 +900%approx]
EPS
(ord) €2.75 [H1]
Net
Liquidity €-0.970bn (from €1.742bn year previous) [-55%]
Cash
at Hand €11.3bn (+€0.6bn over H1)
Operating
C-F €-123.5bn (EBIT - [€0.711bn / 2 quarters])
Free
Cash Flow €-0.36bn (from €-0.031bn year previous) [>-1000%]
Headlines:
-
negative H1 € currency headwinds (€800m in variance analysis)
-
positive ongoing 'monozukuri' cost-down efforts to off-set FX effect.
-
ongoing deployment of 'push-pull' inventory ordering to 'wave
balance' overall stock levels across independent and group
dealerships
By
Division:
Automotive
-
Although
registrations grew 4.7% over H1, Autos revenues actually fell by 3.3%
to €18.739bn vs €19.383bn a year previously. Since the Q1 report
showed Autos revenue of €7.727bn, it is calculated that Q2 offered
an improved turnover of €11.012bn.
Of
H1's 4.7% worldwide increase in car and LCV registrations (vs 4.1%
TIV), Renault saw a majority of 11 country gains amongst its 'top 15'
countries; its top 2 regions, France and Brazil offering the best
revenue stream marriage of improved volumes and market-share.
Though
a problem previously during the EM good times, Renault's still
overtly Euro-centric template (representing 57% of all sales and
10.2% market-share) experienced a strong overall boost +18% yoy. It
gained 2.3% share in France, able to reach 27.3% domestic sales
share. So overcoming losses in other regions. Eurasia -7%,
Euro-Med-Africa -15%, the Americas -2% and Asia-Pacific -12%.
However, Turkey (Oyak-Renault) saw small marginal gains, as did
S.Korea (Renault-Samsung). Russian sales (via Avtovaz) stayed flat
yoy.
Critically
for H1, whilst the yoy sales growth of Renault badged vehicles has
been effectively flat (at 1.063m units), the loss of yoy sales across
much of the range has been partially countered by the newer compact
cross-over Captur. However it seems Dacia's 24.4% increase (to
263,311 units from 211,607 previously) substantially supported the
bottom-line, given the high 'in-built' margins (via amortised
components and lower fixed and variable costs) of the Romanian
company's business model.
However,
as was the strategic intention when Renault-Nissan was created – to
create an pan-regional and anti-cyclical entity – it was Nissan's
contributions of €0.415b in Q1 and €0.374bn in Q2 that has been
of crucial support.
In
a similar manner, but closer to home, in order to create an off-set
business model during these uncertain times, Renault has sought to
create what it calls a 'virtuous' network of sales channels, with
proportionate sales between private retail and fleet, and lesser to
rental companies and others.
Financial
Services
RCI
Banque saw a revenue improvement for H1 to €1.081bn from €1.058 a
year previously. Given that RCI's Q1 revenue was €0.53bn, its Q2
turnover is obviously calculated as €0.551, showing a 4%
improvement.
Now
operating as a banking entity taking deposits under the ZESTO name –
operating beyond conventional auto financing and insurance realms
since 2012 – RCI has gained account deposits of €5.107bn,
primarily from German customers (75% or so of savings base), French
customers and now as of May 2014, a new avenue of Austrian savers.
Announced
Outlook:
Given
the challenges previously faced by mainstream European VM firms from
2009 onward, it was little surprise that reporting and guidance
transparency was generally opaque. However, Renault's previous non
existent, then scant, guidance has now taken on a more cautiously
optimistic expanded manner for H2:
“Positives
- reduced headwinds by € FX effect, ongoing operational cost-down
efforts”.
“Negatives
– European market momentum*, ongoing EM regional decline, product
life-cycle effects”
[NB
* investment-auto-motives recognises that for “Euro markets
momentum” Renault actually sees it positioned as a mid-positioned,
unavailable 'amber light'].
CEO
and Chairman Ghosn and his executive Board do however state that...
“In
the first half, trends in the Group's key markets were contrasted”.
While its main emerging markets were slowing down, the European
market recovery was stronger than foreseen. In this still uncertain
environment, the Group expects a continuing decline in the market of
its emerging countries, but upgrades its previous 2014 expectations
for the European market at 3-4%, from 2-3% previously”.
“Renault
confirms its guidance:
-
increased registrations and Group revenues (at constant FX rates)
-
improved Group and Auto Division operating profit
-
achievement of +ve Autos FCF
Analysis:
Renault's
model range maintains its conventional hatchback's with Twingo, Clio,
Megane, and its lead in compact MPVs with Scenic. Megane and Scenic
however have become 'long in the tooth'. Newer Twingo has from its
inception been under pressure from competitors (eg Hyundai i10, Skoda
Citigo) hence the rational for its shared-costs development work with
Daimler, thus projected volume sales may be problematic outside of
France. Positively however, though late by sector standards new
Captur provides for an “urban cross-over”. The modus operandi
being to intentionally arrive 'late' so as not to cannibalise
Nissan's European sales of Juke, and to also critically deploy much
of Juke's (Clio shared) amortised platform and components for the
seemingly “all new” vehicle; so able to boost per unit ex-factory
margins. Reports indicate that sales-wise across Europe since Q4
2013, it now leads its sibling models Juke and Dacia Duster, and
badged as the Samsung QM3 is expected to sell well locally given
renewed S. Korean economic strength.
The
Dacia brand continues to demonstrate its worth as the value-marque
during these value conscious times. The highly positive customer
reaction to Duster since 2010 demonstrates its relative uniqueness.
Though conventionally engineered from a car platform, its SUV-like
character (rather than that of softer cross-over) and relative
'on-demand' off-road capability appeals to a broad section of buyers,
from suburban families seeking more on-road presence, spacious
functionality and winter safety, to small enterprise 'tradies'
(plumbers, carpenters etc) choosing its comfort, style and
(construction site) useful 4WD. over that of a small van; a similar
need to those (farmers and others) who live in the countryside.
Thus
Renault-Nissan holds the top three best-selling cross-over/SUVs in
Europe, with the possibility that ex-Juke owners seeking a change opt
for Captur or Duster, so retaining much of the customer-base.
Critically
(unlike Daimler's constant reporting of its Van division) Renault's
H1 presentation failed to spotlight the importance that its LCV
division plays. Renault is a European sector leader providing
obviously own-branded vans of Kangoo, (Dacia) Dokker, Trafic and
Master rebadged as Nissan when useful (eg Interstar). Moreover,
Trafic is also licensed to GM's Vauxhall-Opel so bring-in either per
unit royalties or an annual license fee.
Since
during any economic upturn, van sales volumes gain from the
commercial imperative to order LCVs, as opposed to the typical latter
wave of private car sales.
Somewhat
hidden away within accompanying earnings report, a list of H1
registration and productions statistics was provided. This showed:
-
Kangoo +6.7% (74.4k units vs 69.7k year previous)
-
Dokker +28.5% (27.9k units vs 21.7k)
-
Trafic + 11.8% (35.1k units vs 31.5k)
-
Master -2.5% (43.8k units vs 44.9k)
[NB
Master now under greater pressure from Merrcedes Sprinter and VW
Crafter]
Given
the headwinds presented by the ongoing FX effect of the comparitively
strong Euro, Renault's executive team may well be hoping that the
ECB's “Draghai's Put” will be brought into play to provide an
export earnings boost from Chinese JV equity contributions,
continuing Nissan contribution primarily from N.America and its own
portion of non-European sales.
Whilst
overall unit sales have suffered in S. America and Central America,
with Renault's sales down likewise, it has managed to pick-up
market-share with obviotus marketing exercises such as the 'GT-Line'
(Renault badged) Sandero, so offering the appeal of value and
apparent sportiness.
Whilst
Renault is well placed to enjoy the European economic revival, when
finally under-way, given its updated model range and prevelence in
compact cross-over/SUVs, the equity market's general confidence –
seen in Renault's high p/e levels – has been premature; hence the
unsurprising stock correction upon H1 earnings release.
Peugeot
SA-
(only
H1 figures reported,
so,
calculated as H1 - Q1 = Q2,
or
as Autos and Parts+Financial Services)
Unit
Sales
Revenue
(Cons) €14.3bn (H1 €27.616bn – Q1 €13.3bn) [H1 -0.44%]
EBIT
€0.2385bn (H1 €0.305bn + €0.172bn = €0.477bn / 2 qtrs) [H1
>+600%]
Net
Income €0.1885bn (H1 €0.207bn + €0.17bn = €0.377bn/ 2
qtrs) [
Consolidated
€0.021bn (H1 €-0.145bn + €0.103bn = €-0.042bn / 2 qtrs)
EPS
(ord) €-0.25
Net
Liquidity €11.872bn (from €9.91bn year previously)
Operating
C-F €0.83bn (H1 €1.66bn / 2 qtrs)
Free
Cash Flow €0.755bn (H1 €1.514bn / 2 qtrs)
Headlines:
-
agreement of new €3bn syndicated credit facility in April
-
negative € FX impact for H1 of €251m
-
favourable impact of pricing policy, model mix, profit channels
-
France and Italy market share beats national TIV uplifts
-
H1 China launch of 2008 and DS5 LS / H2 China launch DS6 WR
-
H1 Europe launch of new C1 and C4 Cactus / H2 Europe 508
-
reduced 2014 CapEx to >7% (thereafter 7-8% of revenues)
-
vehicle inventories in midst of reduction (valued €4.5bn in '13,
€3.5bn '16)
-
Banque PSA alliance with Santander in Europe
By
Division:
Autos
-
H1
revenues of €18.61bn, which when Q1 revenues of €8.925bn are
subtracted, shows €9.685bn for Q2. H1 Operating income of €0.007bn,
when divide over 2 qtrs showed €0.0035, impacted by the H1 €-0.1bn
special item charge for restructuring costs. PSA's variance analysis
shows that the general operating environment gave a headwind of
€-0.333bn, but more than countered by internal gains of €0.878bn
for the H1 period.
H1
Worldwide sales up +5.5% to 1.541m units. Of which: Europe +11.7% to
956k units, China and SE Asia +27.7% to 360k, Latin America down
-26.8% to 107k, Eurasia down -26.5% to 27k, India and Pacific down
-3.7% approx 10k, Middle East / Africa down 37.2% to 82k. Altogether,
ex Europe 'International' sales contracted by -3.2%.
Components
-
Faurecia
had H1 revenues of €9.328bn, which subtracting Q1 revenues of
€4.518bn, shows Q2 of €4.81bn. H1 revenues marginally improved by
+0.68%, with EBIT improved by €0.055bn to €0.266bn.
Financial
Services -
Banque
PSA had H1 revenues of €0.848bn, which subtracting Q1 revenues of
€0.418bn, shows Q2 of €0.43bn. H1 revenues down by €-0.04bn,
with EBIT down €-0.026bn. Its penetration rate dropped by 1.4% to
27.3%, whilst the number of new lease and finance contracts fell by
15,039 to 360,781, as the total outstanding loan value contracted by
€0.5bn to €21.9bn.
Consolidated
-
As
reported excludes €0.121bn H1 income from China's DPCA and CAPSA
alliances, which when re-merged shows Net Income of €0.1885 +
€0.0605 = €0.249bn. The major item of note is the rise in FCF at
€1.514: primarily consisting of: €1,459bn Faurecia provision +
€1.139bn in Autos working capital + the large equity derived cash
injection of €2.944bn. Set against primary cost of CapEx of €1.159.
Announced
Outlook:
“In
2014 PSA expects to see automotive demand increase by around 3% in
Europe and 10% in China, but decline some 7% in Latin America and
around 10% in Russia”
“It
is aiming to deliver recurring positive Group operating free cash
flow by 2016 at the latest, and an aggregate €2bn in Group
operating free cash flow over the 2016-18 period. It is also
targeting an operating margin of 2% in 2018 in the Automotive
division, with the objective of reaching 5% over the period of the
next medium-term plan, covering 2019-23”
Analysis:
PSA
executives note the need to alter the dealer forecourt vehicle
inventory management of independent and group dealers. Previously old
stock had accumulated through the downturn with governmental
eco-schemes to support national auto-sector also adding an influx of
new capacity so raising to inventory levels to record highs. Now that
that the pressure to “sell, sell, sell” has retracted somewhat,
the value of lower inventory levels should be seen in policy-driven
“floor pricing” on new models, which provides for improving
stable units margins and so better dealer relationships.
Renewal
of the model range will continue to improve sought modernity. Peugeot
and Citroen, respectively gaining evolutionary and revolutionary
aesthetics befitting respective brand values, whilst DS (yet to be
properly dealer differentiated in Europe, though so in China)
continues its unique cosmetic path.
The
perennial b-segment hatchbacks (208 / C3) though face-lifted in 2013
appear “long in the tooth” because – as with many auto-makers -
of necessarily postponed new model capex budgeting. Previously,
limited CapEx was directed at what PSA recognised as immediate
requirements. Such as that pertaining to urgent a-segment replacement
in its JV with Toyota, and the need to maintain its leadership within
the important compact-MPV class.
These
efforts have resulted in the new C1, which sought to adopt and merge
the now segment endemic retro-face (from upscale Mini and 500) into
an own-brand avant-garde aesthetic (see C4 Picasso). That avant-garde
cosmetic extended yet further with the more radical C4 Cactus, a new
variant-themed sibling to C4 Picasso. C4 Cactus is essentially the C4
MPV morphed into Urban SUV, presenting itself with 'impact-capable'
front, rear and sides, door skins wearing external “impact pads”
which though do offer some protection, in reality have been created
to mimic the touch-pad and screen-icons effect of personal mobile
devices, so engendering similar user attachment and affection within
customer psychology.
So
the b-segment and c-segment model line (C3/208 and C4/308 continues
to develop onward from previous hatchback and MPV variants, to today
for Peugeot include 'mono-boxes' with respectively cross-over
influence (5008/3008/2008), and for Citroen, now 'style-SUVs'. (The
'Cactus' cosmetic far more convincing than that of the necessarily
cost-constrained C3 Aircross of Latin America).
Thus
with a broader portfolio of plausible variants providing enhanced
product characterisation, able to support higher volume sales, PSA is
now able to more cost effectively deploy its developed dual-axle
powertrains: either conventionally so with an ICE based 4WD system to
reduce costs and increase acceptance in EM regions, and for mature
markets and higher price point eco-models (as with 3008Hybrid4) the
hybrid-driven alternative.
Given
the critical nature of the Euro LCV market to Peugeot, vans have been
partially highlighted in H1 results, with the statement that PSA
retains its LCV l;eadership with 21.2% share.
However,
in March (whilst European TIV is still slack) it was seen that China
had become PSA's lar gest market, this well anticipated in advance
given the prime focus on China for some years, and a timely point for
Dongfeng's 14% equity investment. The 360k units sold in H1
represented 4.2% market share (up from 3.8%). DPCA announced its plan
for a 4th SUV dedicated factory, whilst CAPSA to see 60
dealers by beginning of H2.
Whilst
extending its credit facility by €3bn in April, an exercise that
went hand-in-hand with the new shares and warrants created, PSA
recognised the complimentary need to build its liquidity reserves in
cash and marketable securities, so has over the last wisely boosted
the total from €9.91bn to €11.872bn. Even if (as likely) European
market demand does indeed grow as predicted, the terrain will be very
competitive, especially vis a vis Renault, thus a portion of this sum
may then be deployed for both necessary sales incentives to maintain
and grow market share, to allow working capital to feed the business growth path, and latterly enhance share dividend.
The
major present drawback for PSA is its still uncompetitive labour
rates overhead (labour costs equal to 15.1% of revenues in 2013),
with plans to reduce that figure to <14 .5="" 11="" 2014="" 2015.="" all="" and="" benchmark="" font="" in="" level="" oems.="" of="" relative="" the="" to="">
However,
whilst its 'social contract' with the unions promises to see
high-cost seniors replaced by lower-cost new employees, investors
would expect to see greater transparency in wage cost structures,
specifically that of specific skills-based accordant grading, and the
implementation of the now industry standard 'bankable hours'
approach, critically imposed at the individual factory level; so as
true truly reduce labour rates. Otherwise the present 15.1% will
simply be seen to fall as a function and consequence of general
economic growth and improved production capacity utilisation.
FIAT-Chrysler
-
Unit
Sales 1.2 units(+2%) [vs 1.159 previous year]
Revenue €23.328bn
(+5%) [vs €22.281]
EBIT €0.961bn
(inc €0.004 special items) [vs €1.073bn]
Net
Income €0.197bn
PbT €0.455bn
[vs €0.556bn]
EPS
(ord)
Net
Liquidity €18.7bn
Operating
C-F €0.6bn
Free
Cash Flow
Headlines:
-
May SOP of all new Chrysler 200
-
this the 3rd model from 'US compact-wide' platform
-
Chinese agreement with GAC to produce 3 Jeep models in 2015
-
July €850m corporate bond issuance (4.75% coupon) matures in 2022
-
SEC administration undertaken for establishment of FIAT-Chrysler
Automobiles NV
-
'FCA' NYSE exchange listing planned for October 2014
-
improved volume and mix (with higher retail)
-
legacy product incentives undermined raised (feature-enhanced) new
product pricing
-
improvements undermined by industrial costs, SG/A, R+D, 'unusuals'
and € FX effect
-
Jeep US sales +28% yoy, Ram has (ten year) record sales
-
H2 Jeep expansion in China (Cherokee Trailhawk,
-
Q3 SOP of Dodge Challenger SRT
By
Division:
Autos
-
Q1
geographic deliveries / revenues / EBIT as:
NAFTA
- 627k units (+2%) / €12.258bn (+7%) / €0.598bn (-18%) (with 4.9%
margin)
EMEA
- 286k (flat) / €4.61bn (-3%) / €-0.006bn (-0.1%)
LATAM
203k (-21%) / €2.188bn (-23%) / €0.062bn (-72%) (with 2.8%
margin)
APAC
54k (+42%) / €1.522bn (+34%) / €0.106bn (+20%) (with 7% margin)
Luxury
brands 11k (165%) / €1.406bn (+59%) / €0.166bn (+58%) (11.8%
margin)
A
summary focus upon the leading region shows that the NAFTA region saw
Q2 TIV gains in USA of 0.3m units (+7%) with FIAT-Chrysler gaining
13% uplift in sales. Canadian TIV grew by 0.02m units (+4%), with the
company gaining +6% sales increase. FIAT-Chrysler, now at 12.1% US
market share, has gained 1.5% share since Q2 2011. At 15.3% in
Canada, it has gained 0.4% over the same period. Unsurprisingly,
pick-up trucks lead sales growth, up +10% in USA and +7% in Canada vs
4% growth in US cars and stagnancy in Canadian cars.
Likewise
focus on Asia-Pacific (given present complementary support) shows
overall regional TIV up 0.5m units yoy (+9%), Sales gains seemingly
well in excess of TIV growth, since from low sales base. General
growth in China, India and S. Korea over-coming declines in Japan and
Australia.
FIAT-Chrysler's
country by country market-shares of: China 1%, India 0.3%, Japan
0.4%, Australia 3.9%.
EMEA
(Europe, Middle-East and Africa) has seen marked improvements, with
EBIT rising from €-69m in Q2 2013 to €-6m today, one year on.
Broad Euro TIV increased by 40k units compared to Q2 2013, reaching
450k, though Italy faired 'flat' yoy. In this environment the company
took 13% of Euro share (a declining dynamic since Q2 2011's 14.5%),
but gains in homeland Italy to 44.5% (re-reaching in Q2 2011 mark).
The combination of improved sales volume / model mix (500 family,
Jeep and LCV [esp large van Ducato]) and industrial cost savings
outpacing falls in net pricing and SG/A. The intense pricing
competition amongst mass vehicle producers undermined the positive
pricing effects of LCVs. Ducato is presently the #1 European large
LCV with 25.7% share. Improved JV results and non re-occurrence of
'unusual items' helped to lift profitability to just below
break-even.
Expectantly,
the new confidence in western economies, especially within financial
and property service sectors, helped boost the luxury cars division'
top and bottom lines.
Ferrari
shipped 1,932 street cars (-2%) but with better mix and pricing.
Though stated as “capped volumes to maintain exclusivity” this
total also reflects the off-setting of new N.American demand (+18%)
versus the socially conscious surpression of conspicuous consumption
in China (-12%). Europe down -3% and Asia down -10%. However, the
client demand for large margin V12 cars (F12 Berlinetta and FF) grew
by +1% excluding the unstated, but highly positive contribution, from
the limited series LaFerrari 'hyper-car'. Ferrari revenue of €729m
(+16%) and EBIT of €105m (+9%).
Maserati
delievred 9,491 units, +400% yoy increase due to new Quattroporte and
all new lower segment Ghibli. N.America took 3,500 vehicles, whilst
China took 2,600, Europe 1,700 cars. Maserati revenues of €738m
(+162%), with EBIT of €61m (vs €9m previous year).
Components
-
(Magneti
Marelli – Lighting, Electrics and Electronics, Powertrain)
(Teksid
– Castings of Iron and Alumium)
(Comau
– Production Processes)
Overall
revenues of €2.074bn (-2%), EBIT of €0.060bn (2.9%)
Magneti
Marelli: revenue €1.592bn (vs €1.587 year previous), EBIT €0.05bn
(vs €0.049bn).
Teksid:
revenue €0.166bn (vs €0.189), EBIT €-0.001bn (vs €0.001)
Comau:
revenue €0.336bn (vs €0.358bn), EBIT €0.011bn (vs €0.010).
Consolidated
-
As
is present obvious constant in the auto-industry, North America
continues to do much of the 'heavy lifting' regards group turnover
and net income, with the China element of Asia providing
complimentary support, ultimately providing a 5% uplift in global
turnover. EBIT however down overall by -10%. Thereafter a hike in US
'book basis' taxation (from 22% to 57%), affected more so, this
though counteracted by general decline (esp NAFTA) of cross-regional
special item charges.
Announced
Outlook:
Confirmation
of FY expectations given May 6th -
-
global deliveries of approx 4.7m units (vs previous 4.55m)
-
revenues of €93bn
-
EBITwithin €3.6-4.0bn range (exc special items)
-
net profit of €0.6-0.8bn
-
EPS of €0.44 - €0.60
-
net industrial debt €9.8 - €10.3 range
Analysis:
Since
Marchionne's pronouncement of the necessary 6m unit 21st
century volume manufacturer, Chrysler has, chunk by chunk, become
ever more integrated within FIAT. The theoretical last hurdle to the
full acquisition was overcome just a few days ago, when (as a
formality) over 80% of FIAT shareholders attending the required
meeting approved.
Previously,
Chrysler's resuscitation process - within the re-expanding but still
very competitive automotive world – was kick-started by
Washington's relaxed inward direct investment policies, Capital
Hill's financial assistance, and union recognition that its members
would be best served by VEBA stake-hold release; so as to entice a
new set of private and institutional American investors via the NYSE;
so far beyond the liquidity limits of Milan and Europe.
As
part of that process Marchionne has sought to demonstrate the
apparent strategic potential of an operationally and geographically
re-balanced and revitalised entity. Named FIAT-Chrysler Automobiles
NV using corporate registration in the Netherlands, it is to be
officially established as an improved 'going concern' having already
gained from the much re-strengthened US economy.
The
showcasing of apparent global future potential came via the
presentation of ambitious pan-geographic growth targets, associated
brand sales, their revenue impact and investor appeal. This rightly
gained a mixed reaction regards the feasibility of implementation
from investment analysts.
Response
was that whilst appreciating the rising tide of NAFTA sales,and those
of a slower re-bounding Europe and eventual returned strength of EM
regions, and that FIAT obviously has the necessary industrial small
car and LCV competence, the process of actually gaining such sizeable
new conquest sales elsewhere around the globe would prove tougher
than the rebounding of already established markets.
The
FIAT board must convince investors, and understandably views its ploy
- the ability to use the income of one economically strengthened
region to gain market-share in the next upturn region – as wholly
logical.
However,
whilst the company has a long precedence in EM regions / RoW markets,
given licensing history of its products (to many such as India's
Premier and Poland's Polski) with today full ownership of Serbia's
Zastava brand, the FIAT brand today may well lack the level of 'brand
equity' (ie presence and associations) enjoyed by various of its
international competitors.
Although
the 500 has re-energised the FIAT brand in Europe and to a degree in
the N.America amongst private buyers, its European LCVs through
'Professional' are regaining status, and the inalienable fact that
FIAT is #1 in Latin America (though likewise vulnerable), elsewhere
around the globe it must essentially re-connect (possibly re-invent)
itself to become meaningful.
The
theory to this re-invention process appears well under-way, with the
investor presentation describing the continued strategic deployment
of a dual aspect marque personality. That of extending and
translating the dualistic product design DNA (ie 500 chic vs Panda
FUNctionality) into dealership layouts. As seen, the 'chic' element
also conjoined by the sporting Abarth moniker, this intentionally the
bridge to Alfa Romeo.
As
a child of FIAT's own historical cyclical fortunes, Alfa Romeo has
yet to properly re-start a new growth phase. The b-segment Mito and
c-segment Giulietta deployed as core mainstream market income
providers and brand representatives during the western recession.,
whilst the limited series, mid-engined sportcar 4C seeks to convey
the purist performance 'halo' with associated high-value price point.
Alfa's future execution is vitally important if the brand is to gain
true premium status, by balancing probable new cross-over product
stream income with brand integrity, and so FIAT-Chrysler gain
associated high unit margins. A case of wait and watch business model
developments.
Little
needs to be said about the luxury division's Ferrari and Maserati,
given the capable manner they have been run, especially that of
Maserati's expanded range with Ghibli (see respective income above).
[NB
investment-auto-motives suspects that FIAT-Chrysler will deploy the
aluminium-steel Ghibli structure for future Alfa Romeo models in the
similar exec-class size and also for “specials”. Just as Jaguar
has gained strong learning in volume aluminium vehicle production, so
Alfa Romeo must likewise. Thus the production learning of relatively
low volume Maseratis will be transferred into higher volumes using
latest learning production methods and tools (assisted by JLR) via
Comau and others, so as to provide Alfa with the necessary technical
standing. The exact proportion of aluminium to steel is expected to
alter relative to model type and respective volumes, lower-end Alfas
with more steel content, whilst future Maserati's gain ever more
aluminium and composits].
As
well understood by Marchionne et al, for the near to medium term,
beyond the US rise in Chrysler cars and higher margin Ram truck sales
and the slow but welcome rebound of Europe, it is worldwide brand
power of Jeep that offers good potential.
Jeep
now offers a broad model range with target customer appropriate
styling and packaging, its small urban vehicles wisely echoing
Wrangler for innate brand appeal, their 'boxy' functionality and
perceived durability. Of course, internationally, much relies upon
Jeep, able to leverage its historical and iconic presence across Asia
in the post WW2 era, both as the Willys original, as well as the
various 'domesticised' models in India, China born from licensing
rights aswell as the Philippines' own re-invented Jeepney.
However,
as to how FIAT and Chrysler badged models will fair in international
markets (esp India, SE Asia and Africa) given the stiff competition
from Japanese, S.Koreans and now Detroit counterparts (such as Ford's
efforts in Africa), is presently questionable.
The
concern is that FIAT and Chrysler will not able to generate the
necessary 'brand equity'. This obviously home-grown over a long
period, through sustainable vehicle engineering and product design
quality and through powerful on-going marketing messages – both
aspects well understood by Marchionne. If unable to simultaneously
improve and attract – so creating a virtuous circle of sales and
re-investment – inevitably a company eventually becomes involved in
local market price wars which, even if funded from the profits of
other regions, obviously slowly undermines investor rational.
FIAT's
historical presence and immense success in Brazil since the 1970s
might appear to to the investment community that the Turin company
has the perfect credentials to conquer EM and RoW markets. Yet it
should be recognised that this success was born from very
accommodating Brazilian industrial policy-setting, then reaching-out
to counter the in-market dominance of VW, GM and Ford and critically
to expand the country's then fledgling automotive base. Conversely,
today within a new-order world, indigenous industrial policy power is
very much in the hands of EM governments (hence the central idea of
the “BRIC Bank”) and increasingly so (with BRICs assistance)
within those of newer 'Pioneer' countries.
Thus,
FIAT's continued EM success story will very much depend upon a
government relations as well as the critical mix of product quality /
integrity, “in-market” corporate dedication and the ability to
create deep brand connection.
For
mainstream markets (beyond Jeep) whilst better research, development
and production approaches and executive will can be proactively
applied, the latter aspect of 'brand connection' will require a more
sensitive and exacting approach. Case studies across automotive and
FMCG sectors to do so will be sought out.
The
obvious case-study is that of the Japanese adoration for “retro
Euro chic”' especially original Minis and Cinquecentos. Whilst that
has and will continue to serve well amongst a a small select sliver
of trend-setting EM buyers – themselves promoting such purchases to
aspirant others -
as
time passes even seemingly pertinent yesteryear “cultural contexts”
and USPs (ie the 1950s/60s Italian Romanticism of 'La Dolce Vita' or
the 1930s American glamour and prowess of the Chrysler Building) may
well become more culturally remote as EM people's look to their own
self-built consumer culture futures.
Thus,
new ideologies of indigenous “future chic” will need to be
created – that story partially seen to date in the designer-fashion
clothing sector.
But,
vitally important for mainstream volume vehicle sales, it will be the
ability to find the appropriate local culture 'brand hooks' for
dependability, practicality and charcaterisation (ie FUNctionality)
in products and their marketing that will be critical to reach the
broad mosaic that is the EM mass customer base.
FIAT's
May investor presentation was lengthy, considered and detailed, so as
to obviously try and convince. Marchionne has posited strong argument
regards Jeep's EM future (supported by initial sales growth and plant
investment plans). And the dual-directional philosophy of the FIAT
brand - whilst itself ostensibly regurgitating FIAT's past approaches
– actually makes simple sense.
Until
presentational rhetoric is crystallised through global sales traction
beyond the US, Europe and Brazil, FIAT-Chrysler's long-term global
success remains presently a story of ambition. Given the scale of
international competition from others in the “global 11”
automotive pack, a degree of medium-term caution from the investment
community, after the given western rebound, is inevitable.
FIAT-Chrysler
then must demonstrate to investors its own uniqueness within EM
realms. Others have already proven themselves or otherwise started
their respective stories.
