UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2015
Commission File No. 001-36675
Fiat Chrysler Automobiles N.V.
(Translation of Registrant’s Name Into English)
25 St. James' Street
London SW1A 1HA
United Kingdom
Tel. No.: +44 (0) 20 7766 0311
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F þ Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b)
(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule101(b)
(7): ¨
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No þ
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
The following exhibits are furnished herewith:
Exhibit 99.1 | Fiat Chrysler Automobiles N.V. Semi-Annual Report for the three months and the six months ended June 30, 2015 |
Exhibit 99.2 | Fiat Chrysler Automobiles N.V. Supplemental Information for the three months and the six months ended June 30, 2015 |
Exhibit 99.3 | Fiat Chrysler Automobiles N.V. Supplemental Information for the three months and the six months ended June 30, 2015 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 6, 2015 | FIAT CHRYSLER AUTOMOBILES N.V. | |||
By: /s/ Richard K. Palmer | ||||
Name: Richard K. Palmer | ||||
Title: Chief Financial Officer | ||||
Index of Exhibits
Exhibit Number | Description of Exhibit |
99.1 | Fiat Chrysler Automobiles N.V. Semi-Annual Report for the three months and the six months ended June 30, 2015 |
99.2 | Fiat Chrysler Automobiles N.V. Supplemental Information for the three months and the six months ended June 30, 2015 |
99.3 | Fiat Chrysler Automobiles N.V. Supplemental Information for the three months and the six months ended June 30, 2015 |
Exhibit 99.1
Semi-Annual Report
for the three months and the six months ended June 30, 2015
TABLE OF CONTENTS
Page | ||
BOARD OF DIRECTORS | ||
CERTAIN DEFINED TERMS | ||
INTRODUCTION | ||
MANAGEMENT DISCUSSION AND ANALYSIS | ||
Highlights | ||
Group Results | ||
Liquidity and Capital Resources | ||
Important Events | ||
Risks and Uncertainties | ||
Outlook | ||
SEMI-ANNUAL CONSOLIDATED FINANCIAL STATEMENTS AND NOTES AT JUNE 30, 2015 | ||
Consolidated Income Statements | ||
Consolidated Statements of Comprehensive Income | ||
Consolidated Statements of Financial Position | ||
Consolidated Statements of Cash Flow | ||
Consolidated Statements of Changes in Equity | ||
Notes to Consolidated Financial Statements | ||
Responsibility Statement | ||
BOARD OF DIRECTORS |
Chairman John Elkann (3) |
Chief Executive Officer Sergio Marchionne |
Directors Andrea Agnelli Tiberto Brandolini d’Adda Glenn Earle (1) Valerie A. Mars (1) (2) Ruth J. Simmons (3) Ronald L. Thompson (1) Patience Wheatcroft (1) (3) Stephen M. Wolf (2) Ermenegildo Zegna (2) |
Independent Auditor Reconta Ernst & Young S.p.A. |
(1)Member of the Audit Committee.
(2)Member of the Compensation Committee.
(3)Member of the Governance and Sustainability Committee.
1
CERTAIN DEFINED TERMS
In this document, unless otherwise specified, the terms “we,” “our,” “us,” the “Company,” the “Group,” and “FCA” refer to Fiat Chrysler Automobiles N.V., together with its subsidiaries, or any one or more of them, as the context may require.
2
INTRODUCTION
The Semi-Annual Report for the three and six months ended June 30, 2015 has been prepared in accordance with the requirements of the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union and has been prepared in accordance with IAS 34 – Interim Financial Reporting. The accounting principles applied in the Semi-Annual Consolidated Financial Statements are consistent with those used for the preparation of the Consolidated Financial Statements at December 31, 2014, except as otherwise stated in “New standards and amendments effective from January 1, 2015” in the Notes to the Semi-Annual Consolidated Financial Statements.
The Group’s financial information is presented in Euro except that, in some instances, information in U.S. Dollars is provided in the Semi-Annual Consolidated Financial Statements and information included elsewhere in this report. All references in this report to “Euro” and “€” refer to the currency introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty on the Functioning of the European Union, as amended, and all references to “U.S. Dollars,” “U.S. Dollar,” “U.S.$” and “$” refer to the currency of the United States of America (or “U.S.”).
This Semi-Annual Report is unaudited.
3
Forward-Looking Statements
This document, and in particular the section entitled “Outlook,” contains 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,” “intend,” or similar terms. Forward-looking statements are not guarantees of future performance. Rather, they are based on the Group’s current expectations and projections about future events and, by their nature, are 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 such statements as a result of a variety of factors, including: the Group’s ability to reach certain minimum vehicle sales volumes; developments in global financial markets and general economic and other conditions; changes in demand for automotive products, which is highly cyclical; the Group’s ability to enrich the product portfolio and offer innovative products; the high level of competition in the automotive industry; the Group’s ability to expand certain of the Group’s brands internationally; changes in the Group’s credit ratings; the Group’s ability to realize anticipated benefits from any acquisitions, joint venture arrangements and other strategic alliances; the Group’s ability to integrate its operations; potential shortfalls in the Group’s defined benefit pension plans; the Group’s ability to provide or arrange for adequate access to financing for the Group’s dealers and retail customers; 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; various types of claims, lawsuits and other contingent obligations against the Group; disruptions arising from political, social and economic instability; material operating expenditures in relation to compliance with environmental, health and safety regulations; developments in labor and industrial relations and developments in applicable labor laws; increases in costs, disruptions of supply or shortages of raw materials; exchange rate fluctuations, interest rate changes, credit risk and other market risks; our ability to achieve the benefits expected from the proposed separation of Ferrari; political and civil unrest; earthquakes or other natural disasters and other risks and uncertainties.
Any forward-looking statements contained in this Semi-Annual Report speak only as of the date of this document and the Company does not undertake 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 ("SEC"), the Netherlands Authority for the Financial Markets (stichting Autoriteit Financiële Markten, (the "AFM") and Borsa Italiana S.p.A. (the "CONSOB").
4
MANAGEMENT DISCUSSION AND ANALYSIS
Highlights
For the six months ended June 30, | For the three months ended June 30, | |||||||||
2015 | 2014 | (€ million, except per share data) | 2015 | 2014 | ||||||
55,624 | 45,453 | Net revenues | 29,228 | 23,328 | ||||||
2,140 | 1,231 | EBIT | 1,348 | 961 | ||||||
4,962 | 3,590 | EBITDA(1) | 2,773 | 2,152 | ||||||
2,325 | 1,623 | Adjusted EBIT(2) | 1,525 | 968 | ||||||
907 | 232 | Profit before taxes | 721 | 455 | ||||||
425 | 24 | Net profit | 333 | 197 | ||||||
Net profit/(loss) attributable to: | ||||||||||
398 | (14 | ) | Owners of the parent | 320 | 175 | |||||
27 | 38 | Non-controlling interest | 13 | 22 | ||||||
0.264 | (0.012 | ) | Basic earnings/(loss) per ordinary share(3) | 0.212 | 0.143 | |||||
0.264 | (0.012 | ) | Diluted earnings/(loss) per ordinary share(3) | 0.212 | 0.142 | |||||
(1) | EBIT plus Depreciation and Amortization. |
(2) | Adjusted EBIT is calculated as EBIT excluding gains/(losses) on the disposal of investments, restructuring, impairments, asset write-offs and other unusual income/(expenses) that are considered rare or discrete events that are infrequent in nature. Refer to the Group Results section below for further discussion on Adjusted EBIT. |
(3) | Note 9 to the Semi-Annual Consolidated Financial Statements provides additional information on the calculation of basic and diluted earnings per share. |
At June 30, 2015 | At December 31, 2014 | |||||
Net Debt | (10,832 | ) | (10,849 | ) | ||
Of which: Net industrial debt | (8,021 | ) | (7,654 | ) | ||
Total equity | 15,037 | 13,738 | ||||
Equity attributable to owners of the parent | 14,678 | 13,425 | ||||
Number of employees at period end | 237,709 | 232,165 | ||||
5
Non-GAAP Financial Measures
We monitor our operations through the use of several non-generally accepted accounting principles, or non-GAAP, financial measures: Net Debt, Net Industrial Debt, Adjusted EBIT, EBITDA and certain information provided at constant currency.
We believe these non-GAAP financial measures provide useful and relevant information regarding our operating results and enhance the overall ability to assess our financial performance and financial position. We believe these measures allow management to view operating trends, perform analytical comparisons, benchmark performance between periods and among our segments, as well as make decisions regarding future spending, resource allocations and other operational decisions.
These and similar measures are widely used in the industry in which we operate, however, these financial measures may not be comparable to other similarly titled measures of other companies and are not intended to be substitutes for measures of financial performance and financial position as prepared in accordance with IFRS.
Net Industrial Debt - Refer to the Liquidity and Capital Resources section below for further discussion.
Adjusted EBIT - calculated as EBIT excluding: gains/(losses) on the disposal of investments, restructuring, impairments, asset write-offs and other unusual income/(expenses) that are considered rare or discrete events that are infrequent in nature. Refer to the Group Results section below for further discussion and refer to Note 24 in the accompanying Semi-Annual Consolidated Financial Statements for a reconciliation of Adjusted EBIT to EBIT.
Constant Currency Information - The discussion within Group Results includes information about our results at constant currency. We calculate constant currency by applying the prior-year average exchange rates to current financial data expressed in local currency in which the relevant financial statements are denominated in order to eliminate the impact of foreign exchange rate fluctuations on the translation from local currency to our Euro reporting currency.
6
Group Results
The following is a discussion of the results of operations for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014. The discussion of certain line items (Cost of sales, Selling, general and administrative costs and Research and development costs) includes a presentation of such line items as a percentage of net revenues for the respective periods presented, to facilitate comparisons of the related periods.
The Group is no longer presenting the separate line item Other unusual income/(expenses) on the Consolidated Income Statements. All amounts previously reported within the Other unusual income/(expenses) line item have been reclassified into the appropriate line item within the Consolidated Income Statements based upon the nature of the transaction. For the three months ended June 30, 2014, a total of €2 million was reclassified to Cost of sales from Other unusual income/(expenses). For the six months ended June 30, 2014, a total of €92 million was reclassified from Other unusual income/(expense) to Cost of sales that related to the remeasurement of our VEF denominated net monetary assets. In addition, a total of €271 million was reclassified to Other income/(expenses) from Other unusual income/(expense), which primarily includes the €495 million expense recognized in connection with the execution of the memorandum of understanding (the “MOU”) with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”), entered into by FCA US in January 2014, offset by the non-taxable gain of €223 million on the remeasurement to fair value of the previously exercised options on approximately 10 percent of FCA US’s membership interest in connection with the acquisition of the remaining interest in FCA US previously not owned. Furthermore, €18 million was reclassified to Selling, general and administrative costs from Other unusual income/(expenses).
Three months ended June 30, 2015 compared to the three months ended June 30, 2014
(€ million) | For the three months ended June 30, | |||||
2015 | 2014 | |||||
Net revenues | 29,228 | 23,328 | ||||
Cost of sales | 25,079 | 20,099 | ||||
Selling, general and administrative costs | 1,997 | 1,772 | ||||
Research and development costs | 732 | 601 | ||||
Result from investments | 45 | 36 | ||||
Restructuring costs/(reversal) | 8 | (2 | ) | |||
Other (expenses)/income | (109 | ) | 67 | |||
EBIT | 1,348 | 961 | ||||
Net financial expenses | 627 | 506 | ||||
Profit before taxes | 721 | 455 | ||||
Tax expense | 388 | 258 | ||||
Net profit | 333 | 197 | ||||
Net profit attributable to: | ||||||
Owners of the parent | 320 | 175 | ||||
Non-controlling interest | 13 | 22 | ||||
7
Net revenues
For the three months ended June 30, | Increase/(decrease) | ||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | ||||||||
Net revenues | 29,228 | 23,328 | 5,900 | 25.3 | % | ||||||
Net revenues for the three months ended June 30, 2015 were €29.2 billion, an increase of €5.9 billion, or 25.3 percent (10.3 percent at constant currency), from €23.3 billion for the three months ended June 30, 2014.
The increase in Net revenues was primarily attributable to (i) a €4.9 billion increase in NAFTA Net revenues, related to an increase in shipments, positive net pricing and favorable foreign currency translation effects (ii) a €0.9 billion increase in EMEA mainly attributable to an increase in shipments and a favorable product mix and (iii) an increase of €0.5 billion in Components , which were partially offset by (iv) a decrease of €0.3 billion in LATAM which was attributable to the combined effect of lower vehicle shipments resulting from poor trading conditions in the region's principal markets, partially offset by improved net pricing due to pricing actions in Brazil and (v) a decrease of €0.1 billion in Maserati.
See — Results by Segment below for a detailed discussion of Net revenues by segment.
Cost of sales
For the three months ended June 30, | Increase/(decrease) | ||||||||||||||||
(€ million, except percentages) | 2015 | Percentage of net revenues | 2014 | Percentage of net revenues | 2015 vs. 2014 | ||||||||||||
Cost of sales | 25,079 | 85.8 | % | 20,099 | 86.2 | % | 4,980 | 24.8 | % | ||||||||
Cost of sales for the three months ended June 30, 2015 was €25.1 billion, an increase of €5.0 billion, or 24.8 percent (10.0 percent at constant currency), from €20.1 billion for the three months ended June 30, 2014. As a percentage of Net revenues, Cost of sales was 85.8 percent for the three months ended June 30, 2015 compared to 86.2 percent for the three months ended June 30, 2014.
The increase in Cost of sales was primarily due to the combination of (i) a €1.2 billion increase related to increased volume primarily in the NAFTA, EMEA and Components segments, partially offset by a reduction in volume in LATAM and APAC and (ii) foreign currency translation effects of €3.0 billion primarily related to the strengthening of the U.S. Dollar.
For the three months ended June 30, 2015, Cost of sales includes the total €80 million charge resulting from the Group's adoption of the Venezuelan government’s Marginal Currency System (the "SIMADI" exchange rate) due to the continuing deterioration of the economic conditions in Venezuela (€53 million) and the write-down of inventory in Venezuela to the lower of cost or net realizable value (€27 million) as, due to pricing controls, we are unable to increase the VEF sales price in Venezuela to compensate for the devaluation. Refer to the Results by Segment - LATAM section below for additional detail.
Selling, general and administrative costs
For the three months ended June 30, | Increase/(decrease) | ||||||||||||||||
(€ million, except percentages) | 2015 | Percentage of net revenues | 2014 | Percentage of net revenues | 2015 vs. 2014 | ||||||||||||
Selling, general and administrative costs | 1,997 | 6.8 | % | 1,772 | 7.6 | % | 225 | 12.7 | % | ||||||||
Selling, general and administrative costs include advertising, personnel, and other costs. Advertising costs accounted for approximately 45 percent of total Selling, general and administrative costs for both the three months ended June 30, 2015 and 2014.
8
Selling, general and administrative costs for the three months ended June 30, 2015 were €1,997 million, reflecting an increase of €225 million, or 12.7 percent (1.5 percent at constant currency), from €1,772 million for the three months ended June 30, 2014. As a percentage of Net revenues, Selling, general and administrative costs were 6.8 percent in the three months ended June 30, 2015 compared to 7.6 percent in the three months ended June 30, 2014.
The increase in Selling, general and administrative costs was primarily due to foreign currency translation effects resulting from the strengthening of the U.S. Dollar against the Euro, increased marketing spending for the all-new 2015 Jeep Renegade commercial launch and Pernambuco plant start-up costs in LATAM, partially offset by lower marketing expenses in APAC and Maserati.
Research and development costs
For the three months ended June 30, | Increase/(decrease) | ||||||||||||||||
(€ million, except percentages) | 2015 | Percentage of net revenues | 2014 | Percentage of net revenues | 2015 vs. 2014 | ||||||||||||
Research and development costs expensed during the year | 397 | 1.4 | % | 330 | 1.4 | % | 67 | 20.3 | % | ||||||||
Amortization of capitalized development costs | 334 | 1.1 | % | 261 | 1.1 | % | 73 | 28.0 | % | ||||||||
Write-off of costs previously capitalized | 1 | n.m.(1) | 10 | n.m.(1) | (9 | ) | (90.0 | )% | |||||||||
Research and development costs | 732 | 2.5 | % | 601 | 2.6 | % | 131 | 21.8 | % | ||||||||
(1) Number is not meaningful.
Research and development costs for the three months ended June 30, 2015 were €732 million, an increase of €131 million, or 21.8 percent, from €601 million for the three months ended June 30, 2014. As a percentage of Net revenues, Research and development costs were 2.5 percent for the three months ended June 30, 2015 and 2.6 percent for the three months ended June 30, 2014. Total Research and development costs expensed in three months ended June 30, 2015 increased by €67 million, largely attributable to continued research to support the development of new and existing vehicles.
Total expenditures on research and development amounted to €1,095 million for the three months ended June 30, 2015, an increase of 26.7 percent, from €864 million, for the three months ended June 30, 2014. Development costs capitalized were €698 million (63.7 percent of total expenditures on research and development) for the three months ended June 30, 2015, as compared to €534 million (61.8 percent percent of total expenditures on research and development) for the three months ended June 30, 2014.
Result from investments
For the three months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Result from investments | 45 | 36 | 9 | 25.0 | % | |||||||
Result from investments for the three months ended June 30, 2015 was €45 million, an increase of €9 million, or 25.0 percent, from €36 million for the three months ended June 30, 2014. The increase in Result from investments was primarily attributable to improved results of the Group’s investments in FCA Bank S.p.A. (“FCA Bank”) and Tofas-Turk Otomobil Fabrikasi Tofas A.S. (“Tofas”), both of which are within the EMEA segment.
9
Other (expenses)/income
For the three months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Other (expenses)/income | (109 | ) | 67 | (176 | ) | (262.7 | )% | |||||
Other expenses for the three months ended June 30, 2015 amounted to €109 million, as compared to Other income, net of €67 million for the three months ended June 30, 2014.
For the three months ended June 30, 2015, Other expenses includes the €81 million charge resulting from a consent order agreed with the U.S. National Highway Traffic Safety Administration ("NHTSA") which is described in more detail in Note 26 to the accompanying Semi-Annual Consolidated Financial Statements included elsewhere in this Semi-Annual Report.
For the three months ended June 30, 2014, there were no items that either individually or in aggregate, were considered material.
EBIT
For the three months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
EBIT | 1,348 | 961 | 387 | 40.3 | % | |||||||
EBIT for the three months ended June 30, 2015 was €1,348 million, an increase of €387 million, or 40.3 percent, from €961 million for the three months ended June 30, 2014. The increase was primarily driven by strong performance in NAFTA reflecting an increase of €653 million, an increase of €62 million in EMEA and an increase of €28 million in Components, partially offset by lower results in LATAM and APAC with decreases of €226 million and €60 million, respectively.
EBIT for the three months ended June 30, 2015 includes the total €80 million charge related to the adoption of the Venezuelan government’s SIMADI exchange rate and the write-down of inventory in Venezuela to the lower of cost or net realizable value due to the continuing deterioration of the economic conditions in Venezuela as described in more detail in Results by Segment - LATAM section below. EBIT for the three months ended June 30, 2015 also includes the €81 million charge resulting from a consent order entered into with NHTSA, which is described in more detail in Note 26 to the accompanying Consolidated Financial Statements included elsewhere in this Semi-Annual Report.
Adjusted EBIT
For the three months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Adjusted EBIT | 1,525 | 968 | 557 | 57.5 | % | |||||||
Adjusted EBIT increased by €557 million to €1,525 million, or 57.5 percent due to the combined effect of (i) the strong performance in NAFTA reflecting higher volumes, positive net pricing and favorable foreign currency translation effects primarily related to the strengthening U.S. Dollar, (ii) continued improvement in EMEA, primarily attributable to volume increase and a more favorable product mix, offsetting the negative impact of the strengthened U.S. Dollar on vehicles and components supplied from NAFTA (iii) an increase in Components, offset by (iv) a decrease in LATAM, reflecting lower volumes due to the poor market conditions, Pernambuco start-up costs and the all-new 2015 Jeep Renegade commercial launch costs, partially offset by favorable net pricing and (v) a decrease in APAC as a result of lower volumes, unfavorable net pricing and unfavorable foreign exchange transaction effects from the vehicle sales in Australia, partially offset by a reduction in marketing costs.
10
Net financial expenses
For the three months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Net financial expenses | 627 | 506 | 121 | 23.9 | % | |||||||
Net financial expenses for the three months ended June 30, 2015 were €627 million, an increase of €121 million, or 23.9 percent, from €506 million for the three months ended June 30, 2014. The increase primarily reflects the charge of €51 million recognized in connection with the prepayment of FCA US's secured senior notes due 2019, higher debt levels in LATAM, primarily related to the development of our Pernambuco plant, and unfavorable currency translation effects.
Tax expense
For the three months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Tax expense | 388 | 258 | 130 | 50.4 | % | |||||||
Tax expense for the three months ended June 30, 2015 was €388 million, an increase of €130 million, or 50.4 percent from €258 million for the three months ended June 30, 2014. The €130 million increase was primarily related to the increase in Profit before taxes.
Six months ended June 30, 2015 compared to the six months ended June 30, 2014
(€ million) | For the six months ended June 30, | |||||
2015 | 2014 | |||||
Net revenues | 55,624 | 45,453 | ||||
Cost of sales | 48,058 | 39,430 | ||||
Selling, general and administrative costs | 3,983 | 3,452 | ||||
Research and development costs | 1,459 | 1,227 | ||||
Result from investments | 95 | 69 | ||||
Gains on the disposal of investments | — | 8 | ||||
Restructuring costs | 12 | 8 | ||||
Other (expenses), net | (67 | ) | (182 | ) | ||
EBIT | 2,140 | 1,231 | ||||
Net financial expenses | 1,233 | 999 | ||||
Profit before taxes | 907 | 232 | ||||
Tax expense | 482 | 208 | ||||
Net profit | 425 | 24 | ||||
Net profit/(loss) attributable to: | ||||||
Owners of the parent | 398 | (14 | ) | |||
Non-controlling interest | 27 | 38 | ||||
11
Net revenues
For the six months ended June 30, | Increase/(decrease) | ||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | ||||||||
Net revenues | 55,624 | 45,453 | 10,171 | 22.4 | % | ||||||
Net revenues for the six months ended June 30, 2015 were €55.6 billion, an increase of €10.2 billion, or 22.4 percent (7.0 percent at constant currency), from €45.5 billion for the six months ended June 30, 2014.
The increase in Net revenues was primarily attributable to (i) a €9.4 billion increase in NAFTA Net revenues, related to an increase in shipments, improved net pricing and favorable foreign currency translation effects (ii) a €1.2 billion increase in EMEA mainly attributable to an increase in shipments and a favorable product mix and (iii) an increase of €0.8 billion in Components, which were partially offset by (iv) a decrease of €0.8 billion in LATAM which was attributable to the combined effect of lower vehicle shipments resulting from poor trading conditions in the region's principal markets, partially offset by positive pricing and (v) a decrease of €0.3 billion in Maserati.
See — Results by Segment below for a detailed discussion of Net revenues by segment.
Cost of sales
For the six months ended June 30, | Increase/(decrease) | ||||||||||||||||
(€ million, except percentages) | 2015 | Percentage of net revenues | 2014 | Percentage of net revenues | 2015 vs. 2014 | ||||||||||||
Cost of sales | 48,058 | 86.4 | % | 39,430 | 86.7 | % | 8,628 | 21.9 | % | ||||||||
Cost of sales for the six months ended June 30, 2015 was €48.1 billion, an increase of €8.6 billion, or 21.9 percent (6.6 percent at constant currency), from €39.4 billion for the six months ended June 30, 2014. As a percentage of Net revenues, Cost of sales was 86.4 percent for the six months ended June 30, 2015 compared to 86.7 percent for the six months ended June 30, 2014.
The increase in Cost of sales was primarily due to the combination of (i) a €2.5 billion increase related to increased volume primarily in the NAFTA, EMEA and Components segments, partially offset by a reduction in volume in LATAM and APAC and (ii) foreign currency translation effects of €6.0 billion primarily related to the strengthening of the U.S. Dollar.
For the six months ended June 30, 2015, Cost of sales includes the total €80 million charge resulting from the adoption of the SIMADI exchange rate due to the continuing deterioration of the economic conditions in Venezuela (€53 million) and the write-down of inventory in Venezuela to the lower of cost or net realizable value (€27 million) as, due to pricing controls, we are unable to increase the VEF sales price in Venezuela to compensate for the devaluation as described in more detail in the Results by Segment - LATAM section below.
For the six months ended 2014, Cost of Sales includes €92 million related to the Group's use of the SICAD I rate to remeasure our VEF denominated net monetary assets.
Selling, general and administrative costs
For the six months ended June 30, | Increase/(decrease) | ||||||||||||||||
(€ million, except percentages) | 2015 | Percentage of net revenues | 2014 | Percentage of net revenues | 2015 vs. 2014 | ||||||||||||
Selling, general and administrative costs | 3,983 | 7.2 | % | 3,452 | 7.6 | % | 531 | 15.4 | % | ||||||||
Selling, general and administrative costs include advertising, personnel, and other costs. Advertising costs accounted for approximately 46 percent of total Selling, general and administrative costs for the six months ended June 30, 2015 and 45 percent for the six months ended June 30, 2014.
12
Selling, general and administrative costs for the six months ended June 30, 2015 were €3,983 million, an increase of €531 million, or 15.4 percent (3.2 percent at constant currency), from €3,452 million for the six months ended June 30, 2014. As a percentage of Net revenues, Selling, general and administrative costs were 7.2 percent in the six months ended June 30, 2015 compared to 7.6 percent in the six months ended June 30, 2014.
The increase in Selling, general and administrative costs was due to the combined effects of (i) foreign currency translation of €420 million, primarily resulting from the strengthening of the U.S. Dollar against the Euro (ii) advertising expenses for the EMEA and NAFTA segments for new product launches, partially offset by lower marketing expenses in APAC and Maserati and (iii) commercial launch costs related to the all-new 2015 Jeep Renegade and start-up costs for the Pernambuco plant in the LATAM segment.
Research and development costs
For the six months ended June 30, | Increase/(decrease) | ||||||||||||||||
(€ million, except percentages) | 2015 | Percentage of net revenues | 2014 | Percentage of net revenues | 2015 vs. 2014 | ||||||||||||
Research and development costs expensed | 809 | 1.5 | % | 706 | 1.6 | % | 103 | 14.6 | % | ||||||||
Amortization of capitalized development costs | 648 | 1.2 | % | 506 | 1.1 | % | 142 | 28.1 | % | ||||||||
Write-off of costs previously capitalized | 2 | n.m.(1) | 15 | n.m.(1) | (13 | ) | (86.7 | )% | |||||||||
Research and development costs | 1,459 | 2.6 | % | 1,227 | 2.7 | % | 232 | 18.9 | % | ||||||||
(1) Number is not meaningful.
Research and development costs for the six months ended June 30, 2015 were €1,459 million, an increase of €232 million, or 18.9 percent, from €1,227 million for the six months ended June 30, 2014. As a percentage of Net revenues, Research and development costs were 2.6 percent for the six months ended June 30, 2015 and 2.7 percent for the six months ended June 30, 2014. Total research and development costs expensed in the six months ended June 30, 2015 increased by €103 million, largely attributable to continued research to support the development of new and existing vehicles.
The increase in amortization of capitalized development costs was mainly attributable to the launch of new products, and in particular related to the NAFTA segment, driven by the all-new 2015 Chrysler 200 and the all-new 2015 Jeep Renegade.
Total expenditures on research and development amounted to €2,105 million for the six months ended June 30, 2015, an increase of 24.5 percent, from €1,691 million, for the six months ended June 30, 2014, which is in line with the Group's product development established in the 2014-2018 business plan. Development costs capitalized were €1,296 million (61.6 percent of total expenditures on research and development) for the six months ended June 30, 2015, as compared to €985 million (58.2 percent of total expenditures on research and development) for the six months ended June 30, 2014.
13
Result from investments
For the six months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Result from investments | 95 | 69 | 26 | 37.7 | % | |||||||
Result from investments for the six months ended June 30, 2015 was €95 million, an increase of €26 million, or 37.7 percent, from €69 million for the six months ended June 30, 2014. The increase in Result from investments was primarily attributable to improved results of the Group’s investments in FCA Bank and Tofas, both of which are within the EMEA segment.
Other (expenses), net
For the six months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Other (expenses), net | (67 | ) | (182 | ) | 115 | (63.2 | )% | |||||
Other (expenses), net for the six months ended June 30, 2015 amounted to €67 million, as compared to €182 million for the six months ended June 30, 2014.
For the six months ended June 30, 2015, the total includes the €81 million charge resulting from a consent order agreed with NHTSA, as described in more detail in Note 26 to the accompanying Semi-Annual Consolidated Financial Statements included elsewhere in this Semi-Annual Report, offset by other items that are not individually material. For the six months ended June 30, 2014, the total amounting to €182 million, primarily related to the €495 million expense recognized in connection with the execution of the MOU with the UAW, entered into by FCA US in January 2014 which was partially offset by the non-taxable gain of €223 million on the remeasurement to fair value of the previously exercised options on approximately 10 percent of FCA US’s membership interest in connection with the acquisition of the remaining equity interest in FCA US previously not owned and other items totaling €90 million that are not individually material.
EBIT
For the six months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
EBIT | 2,140 | 1,231 | 909 | 73.8 | % | |||||||
EBIT for the six months ended June 30, 2015 was €2,140 million, an increase of €909 million, or 73.8 percent, from €1,231 million for the six months ended June 30, 2014. The increase was driven by strong performance in NAFTA reflecting an increase of €1,373 million, an increase of €159 million in EMEA and a €54 million increase in Components, partially offset by lower results in LATAM and APAC with decreases of €248 million and €130 million, respectively. The year over year results also reflect a positive translation impact from the strengthening U.S. Dollar.
For the six months ended June 30, 2015, EBIT included the total €80 million charge related to the adoption of the Venezuelan government’s SIMADI exchange rate and the write-down of inventory in Venezuela to the lower of cost or net realizable value due to the continuing deterioration of the economic conditions in Venezuela as described in more detail in the Results by Segment - LATAM section below. EBIT for the six months ended June 30, 2015 also includes the €81 million charge resulting from a consent order entered into with NHTSA, which is described in more detail in Note 26 to the accompanying Semi-Annual Consolidated Financial Statements included elsewhere in this Semi-Annual Report.
For the six months ended June 30, 2014, EBIT included the €495 million charge connected with the execution of the MOU with the UAW entered into by FCA US in January 2014, the effect of the remeasurement of our VEF denominated net monetary assets of €92 million and the non-taxable gain of €223 million on the fair value remeasurement of the previously exercised options in connection with the acquisition of the remaining equity interest of FCA US previously not owned.
14
Adjusted EBIT
For the six months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Adjusted EBIT | 2,325 | 1,623 | 702 | 43.3 | % | |||||||
Adjusted EBIT increased by €702 million to €2,325 million, or 43.3 percent due to the combined effect of (i) the improvement in NAFTA higher volumes, improved net pricing, positive foreign currency translation impact from the strengthening U.S. Dollar, which was partially offset by the negative impacts of the weakened Canadian Dollar and Mexican Peso and increased warranty costs, (ii) continued improvement in EMEA, primarily attributable to volume increase, a more favorable product mix and positive pricing, (iii) an increase in Components, offset by (iv) a decrease in LATAM, reflecting lower volumes due to the poor market conditions and Pernambuco start-up costs, partially offset by favorable pricing and (v) a decrease in APAC mainly due to reduced volumes and unfavorable net pricing.
Net financial expenses
For the six months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Net financial expenses | 1,233 | 999 | 234 | 23.4 | % | |||||||
Net financial expenses for the six months ended June 30, 2015 were €1,233 million, an increase of €234 million, or 23.4 percent, from €999 million for the six months ended June 30, 2014. The increase was primarily due to the charge of €51 million recognized in connection with the prepayment of FCA US's secured senior notes due 2019, higher debt levels in LATAM, primarily related to the development of our Pernambuco plant, and unfavorable foreign currency translation effects.
Tax expense
For the six months ended June 30, | Increase/(decrease) | |||||||||||
(€ million, except percentages) | 2015 | 2014 | 2015 vs. 2014 | |||||||||
Tax expense | 482 | 208 | 274 | 131.7 | % | |||||||
Tax expense for the six months ended June 30, 2015 was €482 million, compared with €208 million for the six months ended June 30, 2014.
The €274 million difference was primarily related to the increase in Profit before tax. Profit before tax for the six months ended June 30, 2014 included certain one-off items including the non-taxable gain related to the fair value remeasurement of the previously exercised options in connection with the acquisition of the remaining equity interest of FCA US previously not owned. There were no similar one-off items during the six months ended June 30, 2015.
15
Results by Segment
The following is a discussion of Net revenues, Adjusted EBIT and shipments for each segment for the three and six months ended June 30, 2015 and 2014.
(€ million, except shipments which are in thousands of units) | Net revenues | Adjusted EBIT | Shipments | ||||||||||||
For the three months ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | ||||||||||
NAFTA | 17,186 | 12,258 | 1,327 | 595 | 677 | 627 | |||||||||
LATAM | 1,851 | 2,188 | (79 | ) | 63 | 138 | 203 | ||||||||
APAC | 1,523 | 1,522 | 47 | 110 | 46 | 54 | |||||||||
EMEA | 5,470 | 4,610 | 57 | — | 322 | 286 | |||||||||
Ferrari | 766 | 729 | 124 | 105 | 2 | 2 | |||||||||
Maserati | 610 | 738 | 43 | 61 | 8 | 9 | |||||||||
Components | 2,549 | 2,073 | 96 | 65 | — | — | |||||||||
Other activities | 211 | 201 | (52 | ) | (28 | ) | — | — | |||||||
Unallocated items & adjustments(1) | (938 | ) | (991 | ) | (38 | ) | (3 | ) | — | — | |||||
Total | 29,228 | 23,328 | 1,525 | 968 | 1,193 | 1,181 | |||||||||
__________________________
(1) Primarily includes intercompany transactions which are eliminated in consolidation.
(€ million, except shipments which are in thousands of units) | Net revenues | Adjusted EBIT | Shipments | ||||||||||||
For the six months ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | ||||||||||
NAFTA | 33,363 | 23,990 | 1,928 | 975 | 1,310 | 1,212 | |||||||||
LATAM | 3,402 | 4,153 | (144 | ) | 107 | 273 | 408 | ||||||||
APAC | 3,035 | 3,019 | 112 | 245 | 93 | 108 | |||||||||
EMEA | 10,154 | 8,951 | 82 | (72 | ) | 593 | 545 | ||||||||
Ferrari | 1,387 | 1,349 | 224 | 185 | 4 | 4 | |||||||||
Maserati | 1,133 | 1,387 | 79 | 120 | 15 | 17 | |||||||||
Components | 4,984 | 4,154 | 164 | 113 | — | — | |||||||||
Other activities | 408 | 402 | (61 | ) | (41 | ) | — | — | |||||||
Unallocated items & adjustments(1) | (2,242 | ) | (1,952 | ) | (59 | ) | (9 | ) | — | — | |||||
Total | 55,624 | 45,453 | 2,325 | 1,623 | 2,288 | 2,294 | |||||||||
(1) Primarily includes intercompany transactions which are eliminated in consolidation.
16
Car Mass-Market
NAFTA
For the three months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in thousands of units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 17,186 | 100.0 | % | 12,258 | 100.0 | % | 4,928 | 40.2 | % | |||||||||
Adjusted EBIT | 1,327 | 7.7 | % | 595 | 4.9 | % | 732 | 123.0 | % | |||||||||
Shipments | 677 | — | 627 | — | 50 | 8.0 | % | |||||||||||
For the six months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in thousands of units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 33,363 | 100.0 | % | 23,990 | 100.0 | % | 9,373 | 39.1 | % | |||||||||
Adjusted EBIT | 1,928 | 5.8 | % | 975 | 4.1 | % | 953 | 97.7 | % | |||||||||
Shipments | 1,310 | — | 1,212 | — | 98 | 8.1 | % | |||||||||||
Three months ended June 30, 2015
Net revenues
NAFTA Net revenues for the three months ended June 30, 2015 were €17.2 billion, an increase of €4.9 billion, or 40.2 percent (15.8 percent at constant currency) from €12.3 billion for the three months ended June 30, 2014. The total increase was primarily attributable to (i) €1.4 billion related to increased volumes (ii) €0.4 billion related to favorable net pricing which includes dealer discount reductions (iii) favorable foreign currency translation effects of €3.3 billion, partially offset by (iv) unfavorable product mix of €0.2 billion.
The 8.0 percent increase in vehicle shipments from 627 thousand units for the three months ended June 30, 2014 to 677 thousand units for the three months ended June 30, 2015 was largely driven by increased demand of the Group’s vehicles in the retail market, including the all-new 2015 Jeep Renegade, the all-new 2015 Chrysler 200, Jeep Cherokee and Ram 1500 and 2500 trucks, partially offset by a reduction in the prior model year Chrysler 200 and Dodge Avenger.
Adjusted EBIT
NAFTA Adjusted EBIT for the three months ended June 30, 2015 was €1,327 million, reflecting an increase of €732 million, or 123.0 percent, from €595 million for the three months ended June 30, 2014.
The increase in NAFTA Adjusted EBIT was attributable to (i) an increase of €351 million due to favorable pricing including a reduction in dealer discounts, which more than offset the negative impacts of the weakened Canadian Dollar and Mexican Peso, (ii) favorable volume impact of €253 million, driven by the increase in shipments described above primarily from the all-new 2015 Jeep Renegade and the all-new 2015 Chrysler 200 and (iii) an increase of €256 million primarily related to favorable foreign currency translation, partially offset by (iv) an increase of €118 million in industrial costs primarily relating to higher base material costs for vehicle content enhancements, net of purchasing efficiencies and (v) an increase of €10 million in Selling, general and administrative costs.
Adjusted EBIT for the three months ended June 30, 2015 excluded the €81 million charge related to the consent order agreed with NHTSA which is described in more detail in Note 26 to the accompanying Semi-Annual Consolidated Financial Statements included elsewhere in this Semi-Annual Report.
17
Six months ended June 30, 2015
Net revenues
NAFTA Net revenues for the six months ended June 30, 2015 were €33.4 billion, reflecting an increase of €9.4 billion, or 39.1 percent (14.6 percent at constant currency) from €24.0 billion for the six months ended June 30, 2014. The total increase was primarily attributable to (i) €2.6 billion related to increased shipments, (ii) favorable net pricing of €0.6 billion, including dealer discount reductions as well as pricing for enhanced content, partially offset by foreign exchange transaction impacts of the Canadian Dollar and Mexican Peso and (iii) favorable foreign currency translation effects of €5.9 billion.
The 8.1 percent increase in vehicle shipments from 1,212 thousand units for the six months ended June 30, 2014 to 1,310 thousand units for the six months ended June 30, 2015, was largely driven by increased demand of the Group’s vehicles in the retail market, including the all-new 2015 Chrysler 200, all-new 2015 Jeep Renegade, Jeep Cherokee, Ram 1500 and 2500 and Dodge Dart.
Adjusted EBIT
NAFTA Adjusted EBIT for the six months ended June 30, 2015 was €1,928 million, reflecting an increase of €953 million, or 97.7 percent, from €975 million for the six months ended June 30, 2014.
The increase in NAFTA Adjusted EBIT was attributable to (i) an increase of €558 million due to favorable net pricing, partially offset by foreign exchange transaction impacts of the Canadian Dollar and Mexican Peso, (ii) favorable volume impact of €327 million, driven by the increase in shipments described above, and (iii) an increase of €342 million mostly related to positive foreign currency translation effects, partially offset by (iv) increased industrial costs of €245 million, primarily resulting from higher base material costs for vehicle content enhancements, increased warranty expenses, partially offset by purchasing efficiencies and (v) a €29 million increase in Selling, general and administrative costs largely attributable to higher advertising costs to support new vehicle launches.
For the six months ended June 30, 2015, Adjusted EBIT excluded the €81 million charge related to the consent order agreed with NHTSA which is described in more detail in Note 26 to the accompanying Semi-Annual Consolidated Financial Statements included elsewhere in this Semi-Annual Report.
For the six months ended June 30, 2014, Adjusted EBIT excluded the €495 million charge connected with the execution of the MOU with the UAW entered into by FCA US in January 2014.
18
LATAM
For the three months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in thousands of units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 1,851 | 100.0 | % | 2,188 | 100.0 | % | (337 | ) | (15.4 | )% | ||||||||
Adjusted EBIT | (79 | ) | (4.3 | )% | 63 | 2.9 | % | (142 | ) | n.m.(1) | ||||||||
Shipments | 138 | — | 203 | — | (65 | ) | (32.0 | )% | ||||||||||
__________________________
(1) Number is not meaningful.
For the six months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in thousands of units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 3,402 | 100.0 | % | 4,153 | 100.0 | % | (751 | ) | (18.1 | )% | ||||||||
Adjusted EBIT | (144 | ) | (4.2 | )% | 107 | 2.6 | % | (251 | ) | n.m.(1) | ||||||||
Shipments | 273 | — | 408 | — | (135 | ) | (33.1 | )% | ||||||||||
__________________________
(1) Number is not meaningful.
Three months ended June 30, 2015
Net revenues
LATAM Net revenues for the three months ended June 30, 2015 were €1.9 billion, a decrease of €337 million, or 15.4 percent (13.3 percent at constant currency), from €2.2 billion for the three months ended June 30, 2014. The total decrease was primarily attributable to (i) lower shipments reflecting poor trading conditions in Brazil and Argentina, partially offset by (ii) favorable net pricing due to pricing actions in Brazil.
The 32.0 percent decrease in vehicle shipments from 203 thousand units for the three months ended June 30, 2014, to 138 thousand units for three months ended June 30, 2015 reflected continued macroeconomic weakness in the region’s principal markets and continued import restrictions in Argentina. The decrease in shipments was also due to strong competition and pricing pressures, however, the Group remained the leader in Brazil for the three months ended June 30, 2015 with a 360 bps lead over the nearest competitor and with a market share of 19.0 percent.
Adjusted EBIT
LATAM Adjusted EBIT for the three months ended June 30, 2015 was negative €79 million, a decrease of €142 million, from €63 million for the three months ended June 30, 2014.
The decrease in LATAM Adjusted EBIT was primarily attributable to the combination of (i) a decrease of €105 million due to unfavorable volume reflecting poor trading conditions in Brazil and Argentina and the related decrease in shipments and vehicle mix in those principal markets, (ii) an increase in industrial costs of €132 million primarily attributable to start-up costs for the Pernambuco plant, (iii) an increase in Selling, general and administrative costs primarily related to the commercial launch of the all-new 2015 Jeep Renegade, partially offset by (iii) favorable net pricing of €112 million driven by pricing actions in Brazil.
Adjusted EBIT for the three months ended June 30, 2015 excluded the €80 million total charge resulting from the adoption of the Venezuelan government’s SIMADI exchange rate and the write-down of inventory in Venezuela to the lower of cost or net realizable value due to the continuing deterioration of the economic conditions in Venezuela as described below.
19
Six months ended June 30, 2015
Net revenues
LATAM Net revenues for the six months ended June 30, 2015 were €3.4 billion, a decrease of €0.8 billion, or 18.1 percent (18.4 percent at constant currency), from €4.2 billion for the six months ended June 30, 2014. The total decrease was primarily attributable to (i) a decrease of €1.1 billion driven by lower shipments, which were partially offset by (ii) favorable net pricing of €0.3 billion.
The 33.1 percent decrease in vehicle shipments from 408 thousand units for the six months ended June 30, 2014, to 273 thousand units for six months ended June 30, 2015 reflected continued macroeconomic weakness in the region’s principal markets, where Brazil continued the negative market trend started in 2012 and Argentina continued to be impacted by import restrictions and overall economic uncertainties.
Adjusted EBIT
LATAM Adjusted EBIT for the six months ended June 30, 2015 was negative €144 million, a decrease of €251 million, from €107 million for the six months ended June 30, 2014.
The decrease in LATAM Adjusted EBIT was primarily attributable to the combination of (i) unfavorable volume/mix impact of €214 million mainly attributable to a decrease in shipments in Brazil, (ii) an increase in industrial costs of €230 million primarily attributable to start-up costs for the Pernambuco plant, (iii) an increase of €75 million in Selling, general and administrative costs primarily for the commercial launch of the all-new 2015 Jeep Renegade, partially offset by (iv) favorable net pricing of €266 million driven by pricing actions in Brazil.
Adjusted EBIT for the six months ended June 30, 2015 excluded the €80 million total charge resulting from the adoption of the SIMADI exchange rate and the write-down of inventory in Venezuela to the lower of cost or net realizable value due to the continuing deterioration of the economic conditions in Venezuela as described below.
Adjusted EBIT for the six months ended June 30, 2014 excluded the €92 million charge for the remeasurement of our net monetary assets in Venezuela resulting from our initial adoption of the SICAD I rate.
Venezuela
On February 10, 2015, the Venezuelan government introduced a new market-based exchange system, referred to as the SIMADI exchange rate, with certain specified limitations on its usage by individuals and entities in the private sector. On February 12, 2015, the SIMADI exchange rate began trading at 170.0 VEF to U.S. Dollar for individuals and entities in the private sector. In February 2015, the Venezuelan government announced that the SICAD I and SICAD II exchange systems would be merged into a single exchange system (the "SICAD") with a rate starting at 12.0 VEF to U.S. Dollar. As of March 31, 2015, the SICAD exchange rate was expected to be used to complete the majority of FCA Venezuela LLC's (“FCA Venezuela”) transactions to exchange VEF for U.S. Dollar and as such, it was deemed the appropriate rate to use to convert our monetary assets and liabilities to U.S. Dollar for the first quarter 2015. Refer to our 2014 Annual Report for additional details regarding the SICAD I and SICAD II exchange rates.
Due to the continuing deterioration of the economic conditions in Venezuela, we now believe it is unlikely that the majority of our future transactions to exchange VEF for U.S. Dollar will be at the SICAD rate. Rather, we have determined that the SIMADI exchange rate is the most appropriate rate to use as of June 30, 2015 based on the volume of VEF to U.S. Dollar exchange transactions in Venezuela since the formation of SIMADI exchange rate as compared to the SICAD rate. As a result of adopting the SIMADI exchange rate at June 30, 2015, we recorded a remeasurement charge of €53 million for the three and six months ended June 30, 2015 on our VEF denominated net monetary assets, including cash and cash equivalents in Venezuela, at an exchange rate of 197.3 VEF to U.S. Dollar (by comparison, the SICAD rate is 12.8 VEF per U.S. Dollar at June 30, 2015). We also recorded a charge of €27 million to reduce inventory held in Venezuela to the lower of cost or net realizable value, as due to pricing controls, we are unable to increase the VEF sales price in Venezuela to compensate for the devaluation. As a result, a total charge of €80 million was recorded within Cost of Sales for the three and six months ended June 30, 2015.
20
In accordance with our use of the SICAD I rate, we recorded a charge of €92 million within Cost of Sales for the six months ended June 30, 2014 related to the remeasurement of our VEF denominated net monetary assets.
As of June 30, 2015, we continue to control and therefore consolidate our Venezuelan operations. We will continue to assess conditions in Venezuela, and if in the future we conclude that we no longer maintain control over our operations in Venezuela, we may incur a pre-tax charge of approximately €180 million using the current exchange rate of 197.3 VEF to USD. Refer to Note 25 in the accompanying Semi-Annual Consolidated Financial Statements included in this Semi-Annual Report for additional information.
APAC
For the three months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in thousands of units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 1,523 | 100.0 | % | 1,522 | 100.0 | % | 1 | 0.1 | % | |||||||||
Adjusted EBIT | 47 | 3.1 | % | 110 | 7.2 | % | (63 | ) | (57.3 | )% | ||||||||
Shipments | 46 | — | 54 | — | (8 | ) | (14.8 | )% | ||||||||||
For the six months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in thousands of units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 3,035 | 100.0 | % | 3,019 | 100.0 | % | 16 | 0.5 | % | |||||||||
Adjusted EBIT | 112 | 3.7 | % | 245 | 8.1 | % | (133 | ) | (54.3 | )% | ||||||||
Shipments | 93 | — | 108 | — | (15 | ) | (13.9 | )% | ||||||||||
Three months ended June 30, 2015
Net revenues
APAC Net revenues for the three months ended June 30, 2015 were €1.5 billion, consistent with Net revenues for the three months ended June 30, 2014. However, Net revenues were 11.8 percent lower at constant currency.
The 14.8 percent decrease in shipments from 54 thousand units for the three months ended June 30, 2014 to 46 thousand units for the three months ended June 30, 2015, was primarily due to heightened competition in China.
Adjusted EBIT
APAC Adjusted EBIT for the three months ended June 30, 2015 was €47 million, a decrease of €63 million, or 57.3 percent from €110 million for the three months ended June 30, 2014.
The decrease in APAC Adjusted EBIT was primarily attributable to (i) lower volumes and mix resulting from increased competition in China, (ii) unfavorable net pricing primarily due to foreign currency effects for vehicle sales in Australia as well as increased incentives in China, partially offset by (iii) a reduction in marketing costs and (iv) favorable foreign currency translation effects.
21
Six months ended June 30, 2015
Net revenues
APAC Net revenues for the six months ended June 30, 2015 were €3.0 billion, consistent with Net revenues for the six months ended June 30, 2014. However, Net revenues were 14.5 percent lower at constant currency.
The 13.9 percent decrease in shipments from 108 thousand units for the six months ended June 30, 2014 to 93 thousand units for the six months ended June 30, 2015, was primarily due to challenging market conditions and competitive market actions in China.
Adjusted EBIT
APAC Adjusted EBIT for the six months ended June 30, 2015 was €112 million, a decrease of €133 million, or 54.3 percent from €245 million for the six months ended June 30, 2014.
The decrease in APAC Adjusted EBIT was primarily attributable to (i) lower volumes/mix impact, (ii) unfavorable net pricing primarily due to foreign currency effects for vehicle sales in Australia as well as increased incentives in China, partially offset by (iii) lower Selling, general and administrative costs as a result of reduced marketing costs.
EMEA
For the three months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in thousands of units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 5,470 | 100.0 | % | 4,610 | 100.0 | % | 860 | 18.7 | % | |||||||||
Adjusted EBIT | 57 | 1.0 | % | — | — | 57 | n.m.(1) | |||||||||||
Shipments | 322 | — | 286 | — | 36 | 12.6 | % | |||||||||||
(1) Number is not meaningful.
For the six months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in thousands of units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 10,154 | 100.0 | % | 8,951 | 100.0 | % | 1,203 | 13.4 | % | |||||||||
Adjusted EBIT | 82 | 0.8 | % | (72 | ) | (0.8 | )% | 154 | n.m.(1) | |||||||||
Shipments | 593 | — | 545 | — | 48 | 8.8 | % | |||||||||||
__________________________
(1) Number is not meaningful.
Three months ended June 30, 2015
Net revenues
EMEA Net revenues for the three months ended June 30, 2015 were €5.5 billion, an increase of €860 million, or 18.7 percent, from €4.6 billion for the three months ended June 30, 2014.
The €860 million increase in EMEA Net revenues was mainly attributable to increased volume, favorable product mix, improved net pricing, and favorable foreign exchange effects.
In particular, the 12.6 percent increase in vehicle shipments, from 286 thousand units for the three months ended June 30, 2014, to 322 thousand units for the three months ended June 30, 2015, was largely driven by the all-new Fiat 500X and all-new 2015 Jeep Renegade.
22
Adjusted EBIT
EMEA Adjusted EBIT for the three months ended June 30, 2015 was €57 million, an improvement from break-even Adjusted EBIT for the three months ended June 30, 2014.
The increase in EMEA Adjusted EBIT was primarily attributable to the combination of (i) a favorable volume/mix impact of €132 million reflecting the continued success of the Fiat 500 family and Jeep brand, specifically from the all-new Fiat 500X and the all-new 2015 Jeep Renegade, partially offset by (ii) a €21 million increase in sales and marketing spending to support the Jeep brand growth and the launch of the all-new Fiat 500X and (iii) a €70 million increase in industrial costs, reflecting higher costs for imported vehicles from the U.S. due to a weaker Euro, partially offset by cost efficiencies.
Six months ended June 30, 2015
Net revenues
EMEA Net revenues for the six months ended June 30, 2015 were €10.2 billion, an increase of €1.2 billion, or 13.4 percent, from €9.0 billion for the six months ended June 30, 2014.
The €1.2 billion increase in EMEA Net revenues was mainly attributable to increased volume, positive net pricing, favorable product mix, primarily driven by the all-new Fiat 500X and the all-new 2015 Jeep Renegade and favorable foreign exchange effects.
In particular, the 8.8 percent increase in vehicle shipments, from 545 thousand units for the six months ended June 30, 2014, to 593 thousand units for the six months ended June 30, 2015, was largely driven by the Fiat 500 family and the Jeep brand.
Adjusted EBIT
EMEA Adjusted EBIT for the six months ended June 30, 2015 was €82 million, an improvement of €154 million from negative €72 million for the six months ended June 30, 2014.
The increase in EMEA Adjusted EBIT was primarily attributable to the combination of (i) a favorable volume/mix impact of €238 million reflecting the continued success of the Fiat 500 family and Jeep brand and more specifically from the all-new Fiat 500X and the all-new 2015 Jeep Renegade, (ii) a €70 million impact from improvement in net pricing, partially offset by (iii) a €60 million increase in sales and marketing spending to support the Jeep brand growth and the launch of the all-new Fiat 500X and (iv) a €101 million increase in industrial costs, reflecting higher costs for U.S. imported vehicles due to weaker Euro, partially offset by purchasing savings and manufacturing efficiencies.
Ferrari
For the three months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 766 | 100.0 | % | 729 | 100.0 | % | 37 | 5.1 | % | |||||||||
Adjusted EBIT | 124 | 16.2 | % | 105 | 14.4 | % | 19 | 18.1 | % | |||||||||
Shipments | 2,059 | — | 1,936 | — | 123 | 6.4 | % | |||||||||||
For the six months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 1,387 | 100.0 | % | 1,349 | 100.0 | % | 38 | 2.8 | % | |||||||||
Adjusted EBIT | 224 | 16.1 | % | 185 | 13.7 | % | 39 | 21.1 | % | |||||||||
Shipments | 3,694 | — | 3,668 | — | 26 | 0.7 | % | |||||||||||
23
Three months ended June 30, 2015
Net Revenues
For the three months ended June 30, 2015, Ferrari Net revenues increased €37 million, or 5.1 percent, from the three months ended June 30, 2014, to €766 million, as a result of higher volumes and a favorable product mix, partially offset by lower sales of engines to Maserati.
Adjusted EBIT
Ferrari Adjusted EBIT for the three months ended June 30, 2015, was €124 million, an increase of €19 million, or 18.1 percent from €105 million for the three months ended June 30, 2014. The increase in Adjusted EBIT was primarily attributable to increased volumes, improved product mix and favorable foreign currency transaction effects.
Six months ended June 30, 2015
Net Revenues
For the six months ended June 30, 2015, Ferrari Net revenues of €1,387 million increased €38 million, or 2.8 percent from €1,349 million for the six months ended June 30, 2014. The increase was primarily attributable to an increase in volumes, positive product mix and favorable foreign currency exchange effects, partially offset by lower sales of engines to Maserati.
Adjusted EBIT
Ferrari Adjusted EBIT for the six months ended June 30, 2015, was €224 million, an increase of €39 million, or 21.1 percent from €185 million for the six months ended June 30, 2014. The increase in Adjusted EBIT primarily reflected an increase in volumes, favorable product mix and favorable foreign currency transaction effects.
Maserati
For the three months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 610 | 100.0 | % | 738 | 100.0 | % | (128 | ) | (17.3 | )% | ||||||||
Adjusted EBIT | 43 | 7.0 | % | 61 | 8.3 | % | (18 | ) | (29.5 | )% | ||||||||
Shipments | 8,281 | — | 9,491 | — | (1,210 | ) | (12.7 | )% | ||||||||||
For the six months ended June 30, | ||||||||||||||||||
(€ million, except shipments which are in units) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Net revenues | 1,133 | 100.0 | % | 1,387 | 100.0 | % | (254 | ) | (18.3 | )% | ||||||||
Adjusted EBIT | 79 | 7.0 | % | 120 | 8.7 | % | (41 | ) | (34.2 | )% | ||||||||
Shipments | 15,587 | — | 17,532 | — | (1,945 | ) | (11.1 | )% | ||||||||||
24
Three months ended June 30, 2015
Net revenues
For the three months ended June 30, 2015, Maserati Net revenues were €610 million, reflecting a decrease of €128 million, or 17.3 percent (29.0 percent at constant currency), from €738 million for the three months ended June 30, 2014. The decrease was primarily driven by the decrease in vehicle shipments from 9,491 units for the three months ended June 30, 2014 to 8,281 units for the three months ended June 30, 2015, resulting from weaker demand in China and unfavorable product mix.
Adjusted EBIT
Maserati Adjusted EBIT for the three months ended June 30, 2015 was €43 million, reflecting a decrease of €18 million, or 29.5 percent, from €61 million for the three months ended June 30, 2014. The decrease was due to the decrease in volume described above, unfavorable mix and net pricing, partially offset by a reduction in Selling, general and administrative costs and cost efficiencies.
Six months ended June 30, 2015
Net revenues
For the six months ended June 30, 2015, Maserati Net revenues were €1,133 million, reflecting a decrease of €254 million, or 18.3 percent (29.1 percent at constant currency), from €1,387 million for the six months ended June 30, 2014. The decrease was primarily driven by a decrease in vehicle shipments from 17,532 units for the six months ended June 30, 2014 to 15,587 units for the six months ended June 30, 2015, resulting from weaker demand in China and an unfavorable product mix.
Adjusted EBIT
Maserati Adjusted EBIT for the six months ended June 30, 2015 was €79 million, reflecting a decrease of €41 million, or 34.2 percent, from €120 million for the six months ended June 30, 2014. The decrease was due to lower volumes described above and unfavorable product mix and net pricing, partially offset by a reduction in Selling, general and administrative costs and cost efficiencies.
25
Components
For the three months ended June 30, | ||||||||||||||||||
(€ million, except percentages) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Magneti Marelli | ||||||||||||||||||
Net revenues | 1,868 | 1,592 | 276 | 17.3 | % | |||||||||||||
Adjusted EBIT | 76 | 55 | 21 | 38.2 | % | |||||||||||||
Comau | ||||||||||||||||||
Net revenues | 532 | 336 | 196 | 58.3 | % | |||||||||||||
Adjusted EBIT | 20 | 11 | 9 | 81.8 | % | |||||||||||||
Teksid | ||||||||||||||||||
Net revenues | 172 | 166 | 6 | 3.6 | % | |||||||||||||
Adjusted EBIT | — | (1 | ) | 1 | 100.0 | % | ||||||||||||
Intrasegment eliminations | ||||||||||||||||||
Net revenues | (23 | ) | (21 | ) | (2 | ) | 9.5 | % | ||||||||||
Components | ||||||||||||||||||
Net revenues | 2,549 | 100.0 | % | 2,073 | 100.0 | % | 476 | 23.0 | % | |||||||||
Adjusted EBIT | 96 | 3.8 | % | 65 | 3.1 | % | 31 | 47.7 | % | |||||||||
For the six months ended June 30, | ||||||||||||||||||
(€ million, except percentages) | 2015 | % of segment net revenues | 2014 | % of segment net revenues | Increase/(decrease) | |||||||||||||
Magneti Marelli | ||||||||||||||||||
Net revenues | 3,675 | 3,166 | 509 | 16.1 | % | |||||||||||||
Adjusted EBIT | 132 | 98 | 34 | 34.7 | % | |||||||||||||
Comau | ||||||||||||||||||
Net revenues | 1,000 | 697 | 303 | 43.5 | % | |||||||||||||
Adjusted EBIT | 31 | 20 | 11 | 55.0 | % | |||||||||||||
Teksid | ||||||||||||||||||
Net revenues | 352 | 328 | 24 | 7.3 | % | |||||||||||||
Adjusted EBIT | 1 | (5 | ) | 6 | n.m.(1) | |||||||||||||
Intrasegment eliminations | ||||||||||||||||||
Net revenues | (43 | ) | (37 | ) | (6 | ) | 16.2 | % | ||||||||||
Components | ||||||||||||||||||
Net revenues | 4,984 | 100.0 | % | 4,154 | 100.0 | % | 830 | 20.0 | % | |||||||||
Adjusted EBIT | 164 | 3.3 | % | 113 | 2.7 | % | 51 | 45.1 | % | |||||||||
(1) Number is not meaningful.
Net revenues
Components Net revenues for the three months ended June 30, 2015 were €2.5 billion, an increase of €476 million, or 23.0 percent (18.4 percent at constant currency), from the three months ended June 30, 2014.
Components Net revenues for the six months ended June 30, 2015 were €5.0 billion, an increase of €830 million, or 20.0 percent (15.1 percent at constant currency), from the six months ended June 30, 2014.
26
Magneti Marelli
The increase in Magneti Marelli Net revenues for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 primarily reflected increased volumes and positive performance for the lighting and electronic systems businesses.
Comau
The increase in Comau Net revenues for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 was mainly attributable to the body assembly (previously known as body welding) and robotics businesses.
Teksid
The increase in Teksid Net revenues for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 was primarily attributable to an increase in aluminum business volumes, partially offset by a decrease in cast iron business volumes.
For the three months ended June 30, 2015, there was an 18 percent increase in aluminum business volumes, partially offset by a 7 percent decrease in cast iron business volumes compared to the three months ended June 30, 2014.
Adjusted EBIT
Components Adjusted EBIT for the three months ended June 30, 2015 was €96 million, an increase of €31 million or 47.7 percent, from €65 million for the three months ended June 30, 2014.
Components Adjusted EBIT for the six months ended June 30, 2015 was €164 million, an increase of €51 million or 45.1 percent, from €113 million for the six months ended June 30, 2014.
Magneti Marelli
The increase in Magneti Marelli Adjusted EBIT for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014, primarily related to higher volumes and the benefit of cost containment actions and efficiencies, partially offset by start-up costs related to the Pernambuco plant.
Comau
The increase in Comau Adjusted EBIT for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014, was primarily attributable to the body assembly (previously known as body welding) and robotics operations.
Teksid
The increase in Teksid Adjusted EBIT for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014, was primarily attributable to increased volumes from the aluminum business and favorable foreign exchange rate effects.
27
Liquidity and Capital Resources
Total Available Liquidity
In June 2015, FCA entered into a new €5.0 billion syndicated revolving credit facility ("RCF"), which is for general corporate purposes and the working capital needs of the Group. The RCF replaces and expands the €2.1 billion 3-year revolving credit facility entered into by FCA on June 21, 2013 and will replace the U.S.$1.3 billion 5-year revolving credit facility of FCA US that will expire on May 24, 2016. The RCF is available in two tranches. As of June 30, 2015, the first tranche of €2.5 billion was available. The first tranche matures in July 2018 and has two extension options (1-year and 11-months, respectively) which are exercisable on the first and second anniversary of signing. The second tranche, which consists of an additional €2.5 billion, matures in June 2020 and will be available upon termination of the U.S.$1.3 billion FCA US revolving credit facility and the elimination of the restrictions under FCA US’s financing documentation on the provision of guarantees and payment of dividends by FCA US for the benefit of the rest of the Group (refer to Note 27 of the 2014 Consolidated Financial Statements included within our 2014 Annual Report for more detail on the restrictions). The covenants of the RCF include financial covenants (Net Debt/Adjusted EBITDA and Adjusted EBITDA/Net Interest ratios related to industrial activities) and negative pledge, pari passu, cross default and change of control clauses. The failure to comply with these covenants and, in certain cases if not suitably remedied, can lead to the requirement of early repayment of any outstanding amounts.
On June 29, 2015, FCA, the European Investment Bank ("EIB") and SACE finalized a €600 million loan earmarked to support the Group's automotive research, development and production plans for 2015 to 2017 which includes studies for efficient vehicle technologies for vehicle safety and new vehicle architectures. The three-year loan due July 2018 provided by EIB, which is also 50 percent guaranteed by SACE, relates to FCA’s production and research and development sites in both northern and southern Italy. The loan was undrawn at June 30, 2015.
At June 30, 2015, our total available liquidity was €25.4 billion (€26.2 billion at December 31, 2014), including €21.1 billion of cash and cash equivalents, €0.2 billion current securities and €4.0 billion available under undrawn committed credit lines related to (i) the first tranche of the new RCF of €2.5 billion, (ii) the U.S.$1.3 billion (approximately €1.2 billion) revolving credit facility of FCA US expiring May 2016 and (iii) €0.4 billion of other revolving facilities available to FCA treasury. The terms of FCA US's revolving credit facility require FCA US to maintain a minimum liquidity of U.S.$3.0 billion (€2.7 billion), which includes any undrawn amounts under FCA US's revolving credit facility. Total available liquidity is subject to intra-month and seasonal fluctuations resulting from business and collection-payment cycles as well as to changes in foreign exchange conversion rates.
The following table summarizes our total available liquidity:
(€ million) | At June 30, 2015 | At December 31, 2014 | ||||
Cash, cash equivalents and current securities (1) | 21,349 | 23,050 | ||||
Undrawn committed credit lines (2) | 4,017 | 3,171 | ||||
Total available liquidity (3) | 25,366 | 26,221 | ||||
_____________________________
(1) | At June 30, 2015, current securities comprise €232 million (€210 million as of December 31, 2014) of short term or marketable securities which represent temporary investments but do not satisfy all the requirements to be classified as cash equivalents as they may not be able to be readily converted into cash, or they are subject to significant risk of change in value (even if they are short-term in nature or marketable). |
(2) | Excludes the undrawn €0.6 billion medium/long-term dedicated credit lines available to fund scheduled investments as of June 30, 2015 (€0.9 billion was undrawn at December 31, 2014), the undisbursed €0.4 billion on the Mexico Bank Loan as of June 30, 2015 (€0 at December 31, 2014), which can be drawn subject to meeting the preconditions for additional disbursements and also excludes the new EIB term loan of €0.6 billion due July 2018 that was undrawn at June 30, 2015 (€0 at December 31, 2014). |
(3) | The majority of our liquidity is available to our treasury operations in Europe, U.S. (subject to the restrictions on FCA US distributions as discussed in the 2014 Annual Report) and Brazil; however, liquidity is also available to certain subsidiaries which operate in other areas. Cash held in such countries may be subject to restrictions on transfer depending on the foreign jurisdictions in which these subsidiaries operate. Based on our review of such transfer restrictions in the countries in which we operate and maintain material cash balances, we do not believe such transfer restrictions have an adverse impact on the Group’s ability to meet its liquidity requirements at the dates represented above. |
28
Our liquidity is principally denominated in U.S. Dollar and in Euro. Out of the total €21.3 billion of cash, cash equivalents and current securities available at June 30, 2015 (€23.0 billion at December 31, 2014), €12.2 billion, or 57 percent were denominated in U.S. Dollar (€10.6 billion, or 46 percent, at December 31, 2014) and €3.9 billion, or 18 percent, were denominated in Euro (€6.2 billion, or 27 percent, at December 31, 2014). Liquidity available in Brazil and denominated in Brazilian Reals accounted for €0.7 billion or 3 percent at June 30, 2015 (€1.6 billion, or 7 percent, at December 31, 2014), with the remainder being distributed in various countries and denominated in the relevant local currencies.
The decrease in total available liquidity from December 31, 2014 to June 30, 2015 reflects the payment of a €1.5 billion bond at maturity and the reduction of the draw down of bank facilities, partially offset by positive foreign exchange translation effects and the increase in available committed lines; the cash provided by the operations was substantially equal to the cash used in investing activities. Refer to the —Cash Flows section below for additional information regarding the change in cash and cash equivalents.
Cash Flows
The following table summarizes the cash flows of operating, investing and financing activities for the six months ended June 30, 2015 and 2014. For a complete discussion of our cash flows, see our Consolidated Statements of Cash Flows included elsewhere in this Semi-Annual Report.
For the six months ended June 30, | |||||
(€ million) | 2015 | 2014 | |||
Cash and cash equivalents at beginning of the period | 22,840 | 19,455 | |||
Cash flows from operating activities | 4,069 | 3,778 | |||
Cash flows used in investing activities | (4,051 | ) | (3,428 | ) | |
Cash flows used in financing activities | (2,511 | ) | (1,375 | ) | |
Translation exchange differences | 770 | 85 | |||
Total change in cash and cash equivalents | (1,723 | ) | (940 | ) | |
Cash and cash equivalents at end of the period | 21,117 | 18,515 | |||
Operating Activities — Six months ended June 30, 2015
For the six months ended June 30, 2015, cash flows from operating activities were €4,069 million and were primarily the result of:
(i) | Net profit of €425 million adjusted to add back €2,822 million for depreciation and amortization expense; |
(ii) | a net increase of €589 million in provisions, mainly related to net adjustments to warranties for NAFTA and higher accrued sales incentives, primarily to support increased sales volumes in NAFTA; and |
(iii) | €114 million of dividends received from jointly-controlled entities. |
These positive cash flows were partially offset by:
(iv) | the negative impact of the change in working capital of €261 million primarily driven by (a) €1,383 million increase in inventories, in line with the trend in production and sales volumes for the period, (b) €550 million increase in trade receivables primarily as a result of the limited plant activity at December 31, 2014 due to the holiday shutdown and (c) €184 million increase in net other current assets and liabilities, which were partially offset by (d) €1,856 million increase of trade payables, mainly related to increased production in NAFTA and EMEA as a result of increased consumer demand for our vehicles in addition to the holiday shutdown and related limited plant activity at December 31, 2014. |
29
Operating Activities — Six months ended June 30, 2014
For the six months ended June 30, 2014, cash flows from operating activities were €3,778 million and were primarily the result of:
(i) | Net profit of €24 million adjusted to add back (a) €2,359 million for depreciation and amortization expense and (b) other non-cash items of €233 million, which mainly included (i) €366 million related to the non-cash portion of the expense recognized in connection with the execution of the UAW MOU entered into by FCA US in January 2014 (ii) €92 million remeasurement charge recognized as a result of the Group’s change in the exchange rate used to remeasure its Venezuelan subsidiary’s net monetary assets in U.S. Dollars which were partially offset by (iii) the non-taxable gain of €223 million on the remeasurement to fair value of the previously exercised options on approximately 10 percent of FCA US’s membership interest in connection with the acquisition of the remaining interest in FCA US previously not owned; |
(ii) | a net increase of €721 million in provisions, mainly related to (i) an increase in accrued sales incentives, primarily due to an increase in retail incentives as well as an increase in dealer stock levels as of June 30, 2014 compared to December 31, 2013 to support increased sales volumes in NAFTA, and (ii) net adjustments to warranties, including those related to recall campaigns; and |
(iii) | €59 million of dividends received from jointly-controlled entities. |
The decrease in working capital generated cash of €180 million for the six months ended June 30, 2014 and was primarily driven by (a) €1,339 million increase in trade payables mainly related to increased production in NAFTA and EMEA, which was partially offset by (b) €646 million increase in inventory due to increased finished vehicles levels for all geographic regions and luxury brands, (c) €476 million increase in trade receivables, principally in NAFTA due to increased shipments at the end of June 2014 as compared to the end of December 2013 as a result of the annual plant shutdowns in December 2013, and (d) €37 million decrease in net other current assets and liabilities.
Investing Activities — Six months ended June 30, 2015
For the six months ended June 30, 2015, cash flows used in investing activities were €4,051 million, primarily as a result of:
(i) | €4,293 million of capital expenditures, including €1,296 million of capitalized development costs, to support investments in existing and future products. Capital expenditure primarily relates to the car mass-market operations in NAFTA and EMEA, investment in Alfa Romeo and the completion of the Pernambuco plant; partially offset by |
(ii) | a €320 million net decrease in receivables from financing activities primarily related to the decreased lending portfolio of the financial services activities of the Group. |
Investing Activities — Six months ended June 30, 2014
For the six months ended June 30, 2014, cash flows used in investing activities were €3,428 million, primarily as a result of:
(i) | €3,233 million of capital expenditures, including €985 million of capitalized development costs that supported investments in existing and future products. Capital expenditures primarily related to the car mass-market operations in NAFTA and EMEA and the ongoing construction of the Pernambuco plant; and |
(ii) | €280 million of a net increase in receivables from financing activities primarily related to the increased lending portfolio of the financial services activities of the Group. |
30
Financing Activities —Six months ended June 30, 2015
For the six months ended June 30, 2015, cash flows used in financing activities were €2,511 million and were primarily as a result of:
(i) | proceeds from the issuance of U.S.$3.0 billion (€2.8 billion) total principal amount of unsecured senior notes due in 2020 and 2023, |
(ii) | proceeds from new medium-term borrowings for a total of €1,892 million which include the initial disbursement received of €0.4 billion under a new non-revolving loan agreement of U.S.$0.9 billion (€0.8 billion) as part of FCA Mexico's refinancing transaction completed in March 2015, and other financing transactions, primarily in Brazil. |
These items were partially offset by:
(iii) | the prepayment of the FCA US secured senior notes due 2019 for a total principal amount of €2,518 million and the repayment on maturity of a note issued under the Global Medium Term Note Program (“GMTN Program”) for a total principal amount of €1,500 million; and |
(iv) | the payment of medium-term borrowings for a total of €2,743 million, which include the repayment on maturity of the EIB loan of €250 million, the repayment of our Mexican development banks credit facilities of €414 million as part of FCA Mexico's refinancing transaction completed in March 2015, and other financing transactions, primarily in Brazil. |
Financing Activities —Six months ended June 30, 2014
For the six months ended June 30, 2014, cash flows used in financing activities were €1,375 million and were primarily the result of:
(i) | cash payments to the UAW Retiree Medical Benefits Trust, (the "VEBA Trust") for the acquisition of non-controlling interest of €2,691 million relating to the acquisition of the remaining 41.5 percent ownership interest in FCA US previously not owned; |
(ii) | payment of medium-term borrowings for a total of €4,660 million, mainly related to the prepayment of all amounts of the outstanding financial liability with the VEBA Trust, (the “VEBA Trust Note”) amounting to approximately U.S.$5 billion (€3.6 billion), including accrued and unpaid interest; |
These items were partially offset by:
(iii) | proceeds from bond issuances for a total amount of €3,010 million which included (a) €1.0 billion of notes issued as part of the GMTN Program and (b) €2.0 billion of secured senior notes issued by FCA US as part of the refinancing transaction to facilitate the prepayment of the VEBA Trust Note; |
(iv) | proceeds from new medium-term borrowings for a total of €2,840 million, which included the incremental term loan entered into by FCA US of U.S.$250 million (€181 million) under its existing tranche B term loan facility, the additional U.S.$1.75 billion (€1.3 billion) tranche B term loan credit facility entered into by FCA US as part of the refinancing transaction to facilitate the prepayment of the VEBA Trust Note, and new medium-term borrowings in Brazil. |
The translation exchange differences for the six months ended June 30, 2015 were €770 million and mainly reflect the increase in the Euro-translated value of cash and cash equivalent balances denominated in U.S. Dollar, due to the strengthening of the U.S. Dollar.
31
Net Industrial Debt
The following table details our Net Debt at June 30, 2015 and December 31, 2014 and provides a reconciliation of this non-GAAP measure to Debt, the most directly comparable measure included in our Consolidated Statements of Financial Position.
Due to different sources of cash flows used for the repayment of the financial debt between industrial activities and financial services (by cash from operations for industrial activities and by collection of financial receivables for financial services) and the different business structure and leverage implications, we provide a separate analysis of Net Debt between industrial activities and financial services.
The division between industrial activities and financial services represents a sub-consolidation based on the core business activities (industrial or financial services) of each Group company. The sub-consolidation for industrial activities also includes companies that perform centralized treasury activities, such as raising funding in the market and financing Group companies, but do not, however, provide financing to third parties. Financial services includes companies that provide retail and dealer finance, leasing and rental services in support of the car mass-market brands in certain geographical segments, and for the luxury brands.
All FCA US activities are included under industrial activities. Since FCA US’s cash management activities are managed separately from the rest of the Group, we also provide the analysis of Net Industrial Debt split between FCA excluding FCA US, and FCA US.
June 30, 2015 | December 31, 2014 | ||||||||||||||||||||||||||||
Industrial Activities | Financial Services | Consolidated | Industrial Activities | Financial Services | Consolidated | ||||||||||||||||||||||||
(€ million) | Total | FCA ex FCA US | FCA US | Total | FCA ex FCA US | FCA US | |||||||||||||||||||||||
Third Parties Debt (Principal) | (30,593 | ) | (22,090 | ) | (8,503 | ) | (1,512 | ) | (32,105 | ) | (31,381 | ) | (21,011 | ) | (10,370 | ) | (1,980 | ) | (33,361 | ) | |||||||||
Capital Market(1) | (16,694 | ) | (13,941 | ) | (2,753 | ) | (413 | ) | (17,107 | ) | (17,378 | ) | (12,473 | ) | (4,905 | ) | (351 | ) | (17,729 | ) | |||||||||
Bank Debt | (11,866 | ) | (7,081 | ) | (4,785 | ) | (913 | ) | (12,779 | ) | (11,904 | ) | |||||||||||||||||