STLA Stellantis NV

By Eric Sylvers 

Fiat Chrysler Automobiles NV raised its full-year financial guidance on Tuesday, after reporting third-quarter results that showed a return to profit as the Italian-American car maker avoided repeating the one-time costs relating to vehicle recalls that pulled down last year's numbers.

Fiat Chrysler boosted its forecast for adjusted operating profit--which strips out one-time items--to more than EUR5.8 billion ($6.31 billion) from a previous forecast of more than EUR5.5 billion, the second increase in as many quarters. The company left its target for revenue at more than EUR112 billion while it also nudged up its adjusted net profit target.

The car maker said net profit was EUR606 million in the three months to Sept. 30, compared with a loss of EUR387 million in the same period last year. Revenue was almost unchanged at EUR26.84 billion. Adjusted operating profit rose 29% to EUR1.5 billion.

In North America, which accounts for almost two-thirds of revenue and 85% of profit, profit rose thanks to a higher average selling price as sport-utility vehicle and truck sales increased, purchasing efficiencies and lower warranty costs. That was even as revenue edged down slightly due to a drop in car sales. The company shipped fewer vehicles in the region as it phased out the Chrysler 200 and Dodge Dart to make room in U.S. factories for increased production of SUVs and trucks.

Recent market data from the U.S. indicates that the long-awaited plateauing of car sales has arrived. Through the first nine months of the year, industry sales were little changed in the U.S., which nevertheless sets up the possibility of improving on last year's record. Fiat Chrysler's volume dropped 8% in the third quarter, but is still up 4% through the first nine months of the year.

Fiat Chrysler's adjusted operating margin in North America, an industry benchmark, was 7.6% in the third quarter, an increase of almost one percentage point compared with the same quarter last year.

Fiat Chrysler has been slowly improving its profit margin, though it is still well behind its Detroit rivals with General Motors Co. reporting an 11.2% margin for the just-completed quarter.

Stopping production of the Chrysler 200 and Dodge Dart will lead to a double-digit profit margin in North America in 2018, Fiat Chrysler Chief Executive Sergio Marchionne said on a conference call with analysts. The executive declined to give a target for the profit margin next year.

In last year's third quarter, Fiat Chrysler took a charge of EUR761 million to cover future recall campaigns. The company had more recalls in the U.S. in 2015 than any other car maker.

Net industrial debt at the end of September rose to EUR6.51 billion compared with EUR5.47 billion at the end of June, an increase the company attributed to seasonal factors. The company is still forecasting net industrial debt of less than EUR5 billion at the end of the year. Mr. Marchionne said he would achieve the debt reduction without resorting to asset sales, quashing recent rumors.

"Based on what I know today, there is nearly 100% certainty that no deal will happen in Q4 this year," Mr. Marchionne said.

Write to Eric Sylvers at eric.sylvers@wsj.com

(END) Dow Jones Newswires

October 25, 2016 11:59 ET (15:59 GMT)

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