in the First Half of 2003 98th Fiscal Year - FIAT SpA

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the introduction of new models in the second half of the year represent the premises for the improved operating performance of the Sector. ❚ CNH Global posted operating income of 105 million euros during the first half, compared with operating income of 161 million euros in the first half of 2002. The result for 2003 was penalized by a deterioration in volumes stemming from lower sales of construction equipment, deterioration in the sales mix, higher social security and medical costs for its employees, and the negative foreign exchange effect caused by strengthening of the euro. However, notwithstanding these unfavorable conditions, the profitability of the Sector remained at healthy levels thanks to improved margins for new products in the agricultural segment, higher prices, and synergies that made it possible to realize major cost savings. ❚ Iveco’s operating income fell to 22 million euros, down from the 36 million euros of the same period last year due mainly to changes in the scope of consolidation. On a comparable basis operating income was in line with that reported in the first six months of 2002. ❚ Ferrari had an operating loss of -16 million euros in the first half of 2003, compared with operating income of 10 million euros during the same period of 2002. The deterioration in its operating result stemmed from the negative foreign exchange effect caused by strengthening of the euro and the major increase in research and development outlays for future models. On the other hand, the Sector achieved significant improvements thanks to higher volumes and a favorable mix of Ferrari models, which partially offset the negative factors described above. ❚ Magneti Marelli reported operating income of 3 million euros in the first half of 2003, improving from the operating loss of -10 million euros posted for the first half of 2002, 9 Operating Performance and Financial Position of the Fiat Group and Fiat S.p.A. in the First Half of 2003 thanks to efficiency gains and materials cost containment measures that more than compensated for the negative effect of lower volumes. On a comparable consolidation basis, given that Midas posted a major loss in 2002, the Sector would have shown an even greater improvement. ❚ Comau posted an operating loss of -7 million euros in the first half, slightly worse than the loss of -5 million euros reported for the same period of 2002, due to a reduction in income caused by lower levels of activity and a deterioration in margins on contract work in Europe. The deterioration in this result offset the improvement reported by North American activities thanks to higher volumes. ❚ Teksid had operating income of 5 million euros in the first half of 2003, against operating income of 12 million euros in the same period of 2002 (operating loss of -3 million euros, excluding the income generated by the Aluminum Business Unit, which was sold). On a comparable basis, the operating result of the Sector improved thanks to efficiency gains, which offset deterioration in the price/cost ratio. ❚ Although its profitability remained at good levels, FiatAvio posted a decrease in operating income from 119 million euros in the first half of 2002 to 53 million euros in the first six months of 2003 due to deterioration in the volume/mix ratio during the period and the unfavorable trend in foreign exchange rates. ❚ Business Solutions reported operating income of 17 million euros, showing a decrease from the operating income of 38 million euros reported in the first half of 2002, principally due to deconsolidation of IPI, which had posted operating income of 16 million euros, and lower income from the sale of real estate. ❚ Itedi improved its operating result from a loss of -1 million euros in the first half of 2002 to income of 5 million euros in the same period of 2003, thanks to continuation of efficiency recovery programs, lower paper costs, and higher advertising revenues. Operating Result by Sector Fiscal 2002 (in mllions of euros) 1st half 2003 1st half 2002 Change (1,343) Automobiles (Fiat Auto Holdings) (568) (823) 255 163 Agricultural and Construction Equipment (CNH Global) 105 161 (56) 102 Commercial Vehicles (Iveco) 22 36 (14) 70 Ferrari (16) 10 (26) (16) Components (Magneti Marelli) 3 (10) 13 (101) Production Systems (Comau) (7) (5) (2) 27 Metallurgical Products (Teksid) 5 12 (7) 210 Aviation (FiatAvio) 53 119 (66) 147 Insurance (Toro Assicurazioni) (*) 44 105 (61) 67 Services (Business Solutions) 17 38 (21) 3 Publishing and Communications (Itedi) 5 (1) 6 (91) Miscellanea and Eliminations (30) (68) 38 (762) Total for the Group (367) (426) 59 (*) The Operating Result of the Insurance Sector is shown until the date of its sale (May 2, 2003).
EBIT (Earnings Before Interest and Taxes) EBIT in the first half of 2003 was -146 million euros, reflecting deterioration from the loss of -12 million euros reported for the first six months of 2002, mainly in consequence of lower net non-operating income, notwithstanding the reduced operating loss and an increase in investment income. Net loss from investments totaled 42 million euros, an improvement compared with net loss from investments of 103 million euros that included writedowns taken to mark to market the portfolio of listed securities held by the Group’s insurance companies, which were sold at the beginning of May 2003. Additional benefits were realized thanks to the improvement in the results of certain associated companies. In the first half of 2003, net non-operating income totaled 263 million euros, compared with net non-operating income of 517 million euros in the first six months of 2002. The principal items of non-operating income were represented by the gain of 390 million euros, net of transaction costs, upon sale of Toro Assicurazioni and the gains realized from disposal of the Brazilian retail financing activities of Fiat Auto (107 million euros) and IPI (15 million euros). These gains were partially offset by the loss resulting from disposal of Fraikin, an estimate of the damages stemming from the flooding at the Termoli plant in excess of the amount expected to be indemnified by insurance, and restructuring charges and provisions. The high level of net non-operating income reported for the first half of 2002 principally reflected the gains realized upon sale of 34% of Ferrari (671 million euros net of transaction costs), and the gains resulting from disposal of the Aftermarket activity of Magneti Marelli (26 million euros). Restructuring charges and extraordinary provisions to reserves partially reduced the positive effect of these transactions. Net Result for the Period In the first half of 2003, the Group had a loss before taxes of 570 million euros, compared with a loss of 528 million euros in the same period of 2002. This worsening is attributable to deterioration in EBIT, which was partially offset by lower net financial expenses. Net financial expenses totaled 424 million euros in the first half of 2003, down from the 516 million euros in expenses reported for the first half of 2002. The main reasons for this improvement were a reduction in average indebtedness for the period and a decrease in interest rates in Europe and the United States, which offset the increase in corporate spread. The consolidated net loss before minority interest for the first half of 2003 was 737 million euros, compared with a loss of 803 million euros in the same period last year. Group interest in net loss during the first half of 2003 amounted to -708 million euros, reflecting deterioration from the loss of 10 Operating Performance and Financial Position of the Fiat Group and Fiat S.p.A. in the First Half of 2003 -563 million euros reported in the same period last year. It should be noted that, pursuant to the Accounting Principles described in the Notes to the Consolidated Financial Statements at December 31, 2002, the losses pertaining to General Motors, the minority stockholder in Fiat Auto Holdings B.V., were charged to the Group to the extent that they exceeded the value of its share of the capital of the company. Financial Position The Group Balance Sheet at June 30, 2003 in statutory format is shown in the following page. This section provides the information necessary for analysis of the principal balance sheet indicators used in previous periods, such as working capital, net invested capital and net financial position. For a more complete analysis of the individual items of the assets and liabilities, memorandum accounts, and other commitments, please refer to the Notes to the First Half Report, which illustrate the changes in the items of the statutory Balance Sheet. Intangible Fixed Assets Intangible fixed assets totaled 4,198 million euros at June 30, 2003, compared with 5,200 million euros at December 31, 2002. The decrease of 1,002 million euros is mainly due to amortization charged during the period, changes in the scope of consolidation, and the foreign exchange effect on items denominated in dollars (in particular, the goodwill of CNH), net of investments during the period. Property, Plant and Equipment Property, plant and equipment at June 30, 2003 totaled 10,407 million euros, compared with 12,106 million euros at December 31, 2002. The decrease of 1,699 million euros from the beginning of the fiscal year principally refers to changes in the scope of consolidation (-1.2 billion euros), depreciation of 922 million euros (1,087 million euros in the first half of 2002), and the negative foreign exchange effect, which were only partially offset by investments of 771 million euros made during the period (1,157 million euros in the first half of 2002), including long-term leasehold investments, which were reduced by 298 million euros, from 481 million euros in the first half of 2002 to 183 million euros in the first six months of 2003, mainly due to the sale of Fraikin by Iveco. At June 30, 2003, accumulated depreciation and writedowns totaled 17,956 million euros, corresponding to 63% of gross fixed assets, compared with approximately 60% at December 31, 2002.
Page 1 and 2: Report of the Board of Directors on
Page 3 and 4: 2 Financial Highlights of the Fiat
Page 5 and 6: KEY DEVELOPMENTS Despite the weakne
Page 7 and 8: INTRODUCTION In order to facilitate
Page 9: posted in the first half of 2002, m
Page 13 and 14: Reserves At June 30, 2003, the rese
Page 15 and 16: statement of operations is illustra
Page 17 and 18: Toro Assicurazioni (35 million euro
Page 19 and 20: In July 2003, Fiat S.p.A. and Avio
Page 21 and 22: leading operator of call centers. T
Page 23 and 24: During the first half of 2003, the
Page 25 and 26: The key development in the first ha
Page 27 and 28: The general economic slowdown conti
Page 29 and 30: The difficulties encountered in the
Page 31 and 32: Based on preliminary estimates, sal
Page 34 and 35: Fiat Group — Consolidated Financi
Page 36 and 37: (in millions of euros) 35 Fiat Grou
Page 38 and 39: ACCOUNTING PRINCIPLES AND METHODS T
Page 40 and 41: December 31, 2002), Naveco Ltd. 113
Page 42 and 43: Other securities at June 30, 2003 i
Page 44 and 45: euros, change in the scope of conso
Page 46 and 47: The decrease of 13,592 million euro
Page 48 and 49: Other financial income (in millions
Page 50: 18 Income taxes for the period Inco
Page 53 and 54: (in millions of euros) 52 Fiat S.p.
Page 56 and 57: 55 Annex
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Subsidiaries consolidated on a line
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Subsidiaries valued by the equity m
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Subsidiaries valued at cost ❚ Aut
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Subsidiaries valued at cost (contin
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Subsidiaries valued at cost (contin
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Associated companies valued by the
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Associated companies valued at cost
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Other companies valued at cost ❚
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Significant investments sold effect
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Report of the Board of Directors on
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in the First Half of 2003 98th Fiscal Year - FIAT SpA

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