Fiat Chrysler's net cash guidance cut overshadows special dividend pledge

[MILAN] Fiat Chrysler (FCA) reported better-than-expected third-quarter earnings and promised to pay 2 billion euros (S$4.72 billion) in special dividends, but a lowered net cash forecast and a charge related to US diesel talks weighed on shares.

Milan-listed shares in FCA, which had been down more than 3 per cent in early trading, briefly recovered after the earnings release but then fell again. The stock was down 2.2 percent by 1316 GMT.

FCA confirmed its operating guidance for the full year. However, its forecast for net cash was reduced to between 1.5-2.0 billion euros from around 3 billion euros.

It promised the special dividend after last week agreeing to sell parts unit Magneti Marelli to Japan's Calsonic Kansei for 6.2 billion euros.

The sale was the first big deal since Mike Manley took over in July after long-time chief Sergio Marchionne fell ill and later died after succumbing to complications from surgery.

"It's the usual mixed bag, investors are happy about the special dividend, but the lowered guidance for net cash was a surprise," a trader said.

The world's seventh-largest carmaker said adjusted earnings before interest and tax (EBIT) for the July-September period rose 13 per cent to 1.995 billion euros, compared with 1.87 billion euros in a Reuters poll of analysts.

Sales rose 9 per cent, above expectations.

FCA's shift to sell more trucks and SUVs in North America once again boosted operating profit margins in the region. The margin stood at 10.2 per cent in the three months to September from 8.0 per cent in the same quarter a year ago.

Net profit in the quarter was down 38 per cent, due to a 700 million euro charge for estimated costs related to diesel emissions disputes in the United States. The charge does not represent an agreed settlement nor is an admission of liability, FCA added.

FCA has been in intensive settlement talks with the US Justice Department, California and lawyers for owners after the government sued the company in May 2017 contending it illegally used software that led to excess emissions in 104,000 US diesel vehicles sold since 2014.

REUTERS