07 February 2019

FCA - 2018 FULL YEAR AND FOURTH QUARTER RESULTS

FCA reports record full year results, including Magneti Marelli: Adjusted EBIT at €7.3 billion, with NAFTA margin up 70 bps to 8.6%; Adjusted Net Profit up 34% to €5.0 billion; Net Profit up 3% to €3.6 billion. Net industrial cash improved to €1.9 billion.

  • Worldwide combined shipments(2) of 4,842 thousand units, up 102 thousand units
  • Net revenues(1) of €115.4 billion, up 4% (up 9% at constant exchange rates, or CER), with higher shipments, positive pricing and favorable mix
  • Adjusted EBIT(1),(3) of €7.3 billion, up 3% (up 9% at CER), with margin down 10 bps to 3%
  • Adjusted net profit(1),(3) of €5.0 billion, up 34% (up 41% at CER); Net profit of €3.6 billion, up 3% (up 12% at CER)
  • Net industrial cash(3) of €1.9 billion, improved from Net industrial debt position of €2.4 billion at December 2017
  • In Q4 2018, Fitch raised FCA's long-term debt to Investment Grade from"BB" to "BBB-". Outlook confirmed as stable
  • Settled U.S. government and consumer civil diesel emissions claims in line with Q3 2018 provision
  • Magneti Marelli sale transaction on track to close in Q2 2019

The following Group results(1) include Magneti Marelli for comparability with previously provided guidance

Group results - excluding Magneti Marelli(5)
As a result of the announced sale of Magneti Marelli and, in accordance with IFRS, Magneti Marelli will be presented as a discontinued operation in the financial statements for the year ended December 31, 2018, and its results will be presented net of tax in a separate, single line item after Net profit from continuing operations, with the comparative amounts restated. The remaining Components activities are no longer considered a separate reportable segment and are included within "Other activities".

FY 2018 Adjusted EBIT excludes adjustments primarily related to:

(A)   Costs related to final settlements reached on civil, environmental and consumer claims related to U.S. diesel emissions matters
(B)   Impairment expense of €297 million and supplier obligations of €56 million, primarily in EMEA, resulting from changes in product plans in connection with the 2018 - 2022 Business Plan
(C)   Impairment of inventory in connection with acceleration of new emissions standards in China and slower than expected sales
(D)   Accrual in relation to costs for recall campaigns related to Takata airbag inflators, net of recovery
(E)   Special bonus payment of $2,000 to approximately 60,000 employees in NAFTA as a result of the U.S. Tax Cuts and Jobs Act
(F)   Restructuring costs primarily consisting of €123 million in EMEA, partially offset by reversal of €28 million of previously recorded restructuring costs in LATAM
(G)   Charges arising on settlement of a portion of a supplemental retirement plan and an annuity buyout in NAFTA
(H)   Costs in relation to the Port of Savona (Italy) flood and fire
(I)   Recovery of amounts accrued in 2016 in relation to costs for recall contested with a supplier
(J)   Reduction of costs in relation to the NAFTA capacity realignment which were accrued in 2015
(K)   Credits recognized related to indirect taxes in Brazil

NOTES

  1. Refer to page 2 for highlights excluding Magneti Marelli in line with its presentation as a discontinued operation in the Financial Statements for the year ended December 31, 2018:
  2. Combined shipments include all shipments by the Group's unconsolidated joint ventures, whereas consolidated shipments only include shipments from the Group's consolidated subsidiaries;
  3. Refer to page 6 for the reconciliations of Net profit to Adjusted EBIT, page 7 for the reconciliations of Net profit to Adjusted net profit and Diluted EPS to Adjusted diluted EPS and page 8 for the reconciliations of Debt to Net industrial cash/(debt) and Cash flows from operating activities to Industrial free cash flows;
  4. Guidance is not provided on the most directly comparable IFRS financial statement line item for Adjusted EBIT and Adjusted Diluted EPS as the income or expense excluded from these non-GAAP financial measures in accordance with our policy are, by definition, not predictable and uncertain;
  5. In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, depreciation and amortization on the assets of Magneti Marelli ceased as at September 30, The impact of ceasing depreciation and amortization for the three months ended December 31, 2018 was €96 million, net of tax of €20 million;
  6. Our estimated market share data presented are based on management's estimates of industry sales data, which use certain data provided by third-party sources, including IHS Markit and Ward's Automotive;
  7. Our estimated market share data presented are based on management's estimates of industry sales data, which use certain data provided by third-party sources, including IHS Markit, National Organization of Automotive Vehicles Distribution and Association of Automotive Producers;
  8. Number is not meaningful;
  9. Due to unavailability of market data for Italy, the figures reported are an extrapolation and discrepancies with actual data could exist;
  10. Adjusted EBIT - continuing operations excludes certain adjustments from Net profit from continuing operations including: gains/(losses) on the disposal of investments, restructuring, impairments, asset write-offs and unusual income/(expenses) that are considered rare or discrete events that are infrequent in nature, and also excludes Net financial expenses and Tax expense/(benefit). Adjusted EBIT includes both Adjusted EBIT - continuing operations and Adjusted EBIT - discontinued operations;
  11. Adjusted net profit - continuing operations is calculated as Net profit from continuing operations excluding post-tax impacts of the same items excluded from Adjusted EBIT - continuing operations, as well as financial income/(expenses) and tax income/(expenses) considered rare or discrete events that are infrequent in Adjusted net profit includes both Adjusted net profit - continuing operations and Adjusted net profit - discontinued operations;
  12. Adjusted diluted EPS - continuing operations is calculated by adjusting Diluted EPS for the same items excluded from Adjusted net profit - continuing Adjusted diluted EPS includes both Adjusted diluted EPS - continuing operations and Adjusted diluted EPS - discontinued operations;
  13. Excludes certain debt securities held pursuant to applicable regulations (€72 million at December 31, 2018, €69 million at September 30, 2018 and €59 million at December 31, 2017);
  14. Net industrial cash/(debt) is computed as: Debt plus derivative financial liabilities related to industrial activities less (i) cash and cash equivalents, (ii) certain current debt securities, (iii) current financial receivables from Group or jointly controlled financial services entities and (iv) derivative financial assets and collateral deposits; therefore, debt, cash and cash equivalents and other financial assets/liabilities pertaining to financial services entities are excluded from the computation of Net industrial cash/(debt). Net industrial cash/ (debt) should not be considered as a substitute for cash flows or other financial measures under IFRS; in addition, Net industrial cash/(debt) depends on the amount of cash and cash equivalents at each balance sheet date, which may be affected by the timing of monetization of receivables and the payment of accounts payable, as well as changes in other components of working capital, which can vary from period to period due to, among other things, cash management initiatives and other factors, some of which may be outside of the Group's control. Net industrial cash/(debt) should therefore be evaluated alongside these other measures as reported under IFRS for a more complete view of the Company's capital structure and liquidity;
  15. Industrial free cash flows is calculated as Cash flows from operating activities less: cash flows from operating activities related to financial services, net of eliminations; Investment in property, plant and equipment and intangible assets for industrial activities; and adjusted for discretionary pension contributions in excess of those required by the pension plans, net of tax. The timing of Industrial free cash flows may be affected by the timing of monetization of receivables and the payment of accounts payable, as well as changes in other components of working capital, which can vary from period to period due to, among other things, cash management initiatives and other factors, some of which may be outside of the Group's control. Industrial free cash flows includes both Industrial free cash flows - continuing operations and Industrial free cash flows - discontinued operations.

SAFE HARBOR STATEMENT
This document, and in particular the section entitled "2019 Guidance", contains forward-looking statements. In particular, these forward-looking statements include statements regarding future financial performance and the Company's expectations as to the achievement of certain targeted metrics, including net cash/(debt) and net industrial cash/(debt), revenues, industrial free cash flows, vehicle shipments, capital investments, research and development costs and other expenses at any future date or for any future period are forward-looking statements. These statements may include terms such as "may", "will", "expect", "could", "should", "intend", "estimate", "anticipate", "believe", "remain", "on track", "design", "target", "objective", "goal", "forecast", "projection", "outlook", "prospects", "plan", or similar terms. Forward-looking statements are not guarantees of future performance. Rather, they are based on the Group's current state of knowledge, future expectations and projections about future events and are, by their nature, subject to inherent risks and uncertainties. They relate to events and depend on circumstances that may or may not occur or exist in the future and, as such, undue reliance should not be placed on them. Actual results may differ materially from those expressed in forward-looking statements as a result of a variety of factors, including: the Group's ability to launch products successfully and to maintain vehicle shipment volumes; changes in the global financial markets, general economic environment and changes in demand for automotive products, which is subject to cyclicality; changes in local economic and political conditions, changes in trade policy and the imposition of global and regional tariffs or tariffs targeted to the automotive industry, the enactment of tax reforms or other changes in tax laws and regulations; the Group's ability to expand certain of the Group's brands globally; the Group's ability to offer innovative, attractive products; the Group's ability to develop, manufacture and sell vehicles with advanced features including enhanced electrification, connectivity and autonomous driving characteristics; various types of claims, lawsuits, governmental investigations and other contingencies affecting the Group, including product liability and warranty claims and environmental claims, investigations and lawsuits; material operating expenditures in relation to compliance with environmental, health and safety regulations; the intense level of competition in the automotive industry, which may increase due to consolidation; exposure to shortfalls in the funding of the Group's defined benefit pension plans; the Group's ability to provide or arrange for access to adequate financing for the Group's dealers and retail customers and associated risks related to the establishment and operations of financial services companies, including capital required to be deployed to financial services; the Group's ability to access funding to execute the Group's business plan and improve the Group's business, financial condition and results of operations; a significant malfunction, disruption or security breach compromising the Group's information technology systems or the electronic control systems contained in the Group's vehicles; the Group's ability to realize anticipated benefits from joint venture arrangements; the Group's ability to successfully implement and execute strategic initiatives and transactions, including the Group's plans to separate certain businesses; disruptions arising from political, social and economic instability; risks associated with our relationships with employees, dealers and suppliers; increases in costs, disruptions of supply or shortages of raw materials; developments in labor and industrial relations and developments in applicable labor laws; exchange rate fluctuations, interest rate changes, credit risk and other market risks; political and civil unrest; earthquakes or other disasters and other risks and uncertainties.

Any forward-looking statements contained in this document speak only as of the date of this document and the Company disclaims any obligation to update or revise publicly forward-looking statements. Further information concerning the Group and its businesses, including factors that could materially affect the Company's financial results, is included in the Company's reports and filings with the U.S. Securities and Exchange Commission, the AFM and CONSOB.

On February 7th, 2019, at 1 p.m. GMT, management will hold a conference call to present the 2018 full year and fourth quarter results to financial analysts and institutional investors. The call can be followed live and a recording will be available later on the Group website http://www.fcagroup.com/en-us/pages/home.aspx The supporting document will be made available on the Group website prior to the call.

London, February 7th, 2019

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