MILAN -- Italy's Fiat posted better than expected first-quarter results on Tuesday, with its core auto arm narrowing its losses, but its shares fell sharply in what traders said was profit taking after a rally last week.
Fiat almost doubled its group trading profit year-on-year to 47 million euros against analysts' expectations of about 30 million. Trading profit is the clearest snapshot of day-to-day operations under new IFRS accounting standards.
Fiat Auto narrowed its trading loss to 129 million euros from 146 million a year ago, much better than the 170 million euro loss analysts had forecast, thanks to cost savings and a policy of selling fewer cars at higher profit per unit.
"The fundamental story here is all about Fiat Auto and it looks OK," said Stephen Cheetham, autos analyst at Sanford Bernstein.
Analysts welcomed the improvement in Fiat Auto's loss despite a 9.3 percent drop in revenues and an 11.8 percent fall in car sales, particularly Alfa Romeo, the Fiat Stilo and the Punto, a new model of which is due to be launched in September.
In slides prepared for a conference call, Fiat said its auto arm was cutting staff and advertising, trying to share research and development costs with partners and targeting spending more carefully for annualized savings of 500 million euros.
Fiat's first-quarter group operating income swelled to 729 million euros, more than 10 times the year-ago figure, thanks to Fiat booking the first tranche of a $2 billion split-up settlement with General Motors.
Some traders said they were disappointed by Fiat's bottom line because they had expected more of GM's money to trickle through. Group net profit soared to a 293 million euro profit from a loss of 392 million a year ago. Without GM's cash, Fiat would have posted a net loss of 245 million euros.
Fiat stock had been more than 2.5 percent lower before the results but only recovered slightly on the results before tumbling to 5.37 euros, down 5 percent on the day.
"I'm afraid the stock is turning into something quite similar to Porsche, which is a plaything for hedge funds. There is a lot of game-playing going on here," said Sanford Bernstein's Cheetham.
CAR SALES STILL SLIDING
With Fiat Auto still suffering from cut-throat competition in Europe, higher raw material prices and a lull in orders before the new Punto arrives, Fiat is looking at its other vehicle makers to tow the group further back into the black.
In the first quarter, truck-and-bus maker Iveco posted a trading profit of 65 million euros against 60 million last year. Its revenues rose 4.8 percent to 2.23 billion euros.
Tractor-and-bulldozer unit CNH Global posted operating profit of 124 million euros, up 5.1 percent, on revenues of 2.33 billion euros, up 1.6 percent on a year ago.
Fiat said its industrial net debt -- its new benchmark debt tally under IFRS -- totalled 10.06 billion euros against 9.45 billion at the end of 2004.
Financial net debt, which includes financial receivables that used to be counted in Fiat's key net debt figure, came in at 15.86 billion euros from 15.98 billion at the end of 2004.
Fiat said its gross debt should fall below 25 billion euros by the end of 2005 from 32.1 billion at the end of March.
It forecast net industrial cash flow of about 2 billion euros, thanks to the sale of its stake in power holding company Italenergia and some real estate. Net industrial cash flow was negative 550 million euros in the first quarter.