Fiat Chrysler says to halve debt as recovery builds
By Agnieszka Flak
MILAN (Reuters) - Fiat Chrysler Automobiles (FCA) (FCHA.MI: Quote) pledged on Thursday to nearly halve net debt this year, much more than expected as rising sales and profits put it on course to deliver much of an ambitious turnaround plan by the end of 2018.
Eliminating debt has been a major part of that plan, and the world's No.7 carmaker said progress was speeding up as shifting investments toward high-margin SUVs and pickup trucks in its key U.S. market started to pay off.
Strengthening its finances has also become more important since U.S. regulators accused FCA this month of hiding excess diesel emissions, which could lead to hefty fines.
Chief Executive Sergio Marchionne told analysts that talks with the U.S. authorities were ongoing and he hoped the matter may be settled by a simple vehicle fix. FCA (FCAU.N: Quote) has not made any provisions for any potential fines at this stage.
The Italian-American group, which is also striving to build Jeep into a global brand, said net debt would fall to below 2.5 billion euros ($2.7 billion) this year, helped by a projected rise in adjusted operating profit of at least 15 percent.
Net debt fell to 4.6 billion euros at the end of 2016, beating analysts' average forecast of 4.9 billion. Analysts had been projecting a fall to 4 billion at the end of 2017.
"FCA's guidance would suggest that the company is set to continue to grow earnings and beat expectations as well as benefit from deleveraging," said Evercore ISI analyst George Galliers, who has a "buy" rating on the stock. "The same cannot be said for the majority of other OEMs (car manufacturers)."
Marchionne has made delivering on FCA's turnaround plan his key ambition before stepping down in 2019. Continued...