2006 Annual Report - Fiat SpA
2006 Annual Report - Fiat SpA
2006 Annual Report - Fiat SpA
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Financial Review of the Group<br />
Introduction<br />
Principal Transactions that affected the Scope<br />
of Consolidation in <strong>2006</strong><br />
■ The procedure for the sale of the subsidiary Atlanet S.p.A.<br />
to the British Telecom group was for the most part finalised<br />
in the first quarter of <strong>2006</strong> on receiving the approval of the<br />
Italian Guarantor Authority for Competition and the Market.<br />
The transaction was completed when the businesses in Poland<br />
and Brazil were sold during the second half of <strong>2006</strong>.<br />
■ On August 30, <strong>2006</strong>, Teksid S.p.A. sold 100% of the interest<br />
it held in Société Bretonne de Fonderie et Mecanique.<br />
■ On August 31, <strong>2006</strong>, <strong>Fiat</strong> sold its holding in Banca Unione<br />
di Credito (B.U.C.) to BSI (a company of the Generali Group).<br />
■ On December 28, <strong>2006</strong> <strong>Fiat</strong> Auto and Crédit Agricole<br />
completed the transaction for the creation of a 50/50 joint<br />
venture, <strong>Fiat</strong> Auto Financial Services (FAFS), which will handle<br />
<strong>Fiat</strong> Auto’s main financing activities in Europe (retail auto<br />
financing, dealership financing, and long-term car rental and<br />
fleet management). In particular: <strong>Fiat</strong> Auto, upon exercise of<br />
its call option, purchased from Synesis Finanziaria 51% of Fidis<br />
Retail Italia (a company controlling the <strong>Fiat</strong> Auto European<br />
retail financing activities) which then changed its corporate<br />
name into <strong>Fiat</strong> Auto Financial Services. FAFS acquired certain<br />
<strong>Fiat</strong> Auto subsidiaries active in the European <strong>Fiat</strong> Auto dealer<br />
financing and renting business. <strong>Fiat</strong> Auto sold to Sofinco, the<br />
wholly owned consumer credit subsidiary of Crédit Agricole,<br />
50% of the share capital of FAFS.<br />
These changes in the scope of operations do not have<br />
a significant overall impact on the comparability of the data<br />
for the two reference periods. Nevertheless, analyses of both<br />
the Group as a whole and the individual areas highlight<br />
the respective effects.<br />
24 <strong>Report</strong> on Operations Financial Review of the Group<br />
During <strong>2006</strong>, <strong>Fiat</strong> raised its stake in Ferrari from 56% to 85%;<br />
description of related transactions is presented in the Notes<br />
to the Financial Statements. In addition, it should be noted that<br />
on December 6, <strong>2006</strong>, the <strong>Fiat</strong> Group and Norsk Hydro reached<br />
an agreement for the sale of their interests in Meridian<br />
Technologies Inc., 51% and 49% respectively, to a consortium<br />
of investors headed by the Swiss holding company Estatia AG.<br />
Closing of the transaction is subject to approval by competent<br />
authorities.<br />
Starting January 1, <strong>2006</strong> reporting of certain Business Areas<br />
of the Group was redefined as follows.<br />
The <strong>Fiat</strong> Powertrain Technologies Sector is no longer included<br />
in the Automobiles Business Area since it no longer comprises<br />
only the passenger vehicles engine and transmissions activities<br />
– over which <strong>Fiat</strong> regained control in May 2005 following the<br />
termination of the Master Agreement with General Motors –<br />
but also the industrial powertrain activities that were included<br />
in the Iveco Sector until December 31, 2005.<br />
In accordance with IAS 14 – Segment <strong>Report</strong>ing, the figures<br />
for 2005 have consequently been reclassified by assigning<br />
the former Iveco powertrain activities to <strong>Fiat</strong> Powertrain<br />
Technologies (FPT); the Iveco Sector, on the other hand,<br />
no longer includes these activities. From the beginning<br />
of <strong>2006</strong>, FPT also encompasses the C.R.F. powertrain activities.<br />
Starting from January 1, <strong>2006</strong> the <strong>Fiat</strong> Powertrain Technologies<br />
Sector is included in the Components and Production Systems<br />
Business Area and, therefore, from the same date,<br />
the Automobiles Business Area comprises <strong>Fiat</strong> Auto (the <strong>Fiat</strong>,<br />
Alfa Romeo, Lancia and <strong>Fiat</strong> Light Commercial Vehicles<br />
brands), Maserati and Ferrari.<br />
Financial Review of the Group<br />
Operating Performance of the Group<br />
(in millions of euros) <strong>2006</strong> 2005<br />
Net revenues 51,832 46,544<br />
Cost of sales 43,888 39,624<br />
Selling, general and administrative costs 4,697 4,513<br />
Research and development costs 1,401 1,364<br />
Other income (expenses) 105 (43)<br />
Trading profit 1,951 1,000<br />
Gains (losses) on the disposal of investments 607 905<br />
Restructuring costs 450 502<br />
Other unusual income (expenses) (47) 812<br />
Operating result 2,061 2,215<br />
Financial income (expenses) (576) (843)<br />
Unusual financial income – 858<br />
Result from investments: 156 34<br />
- Net result of investees accounted for using the equity method 125 115<br />
- Other income and expenses from investments 31 (81)<br />
Result before taxes 1,641 2,264<br />
Income taxes 490 844<br />
Result from continuing operations 1,151 1,420<br />
Result from discontinued operations – –<br />
Net result for the year 1,151 1,420<br />
Attributable to:<br />
Equity holders of the parent 1,065 1,331<br />
Minority interests 86 89<br />
In the review that follows, net revenues and trading profit are<br />
discussed by single Business Area/Sector; the other data refer<br />
to the Group as a whole.<br />
Net revenues<br />
In <strong>2006</strong> the <strong>Fiat</strong> Group recorded net revenues of 51,832 million<br />
euros, up 11.4% from 2005. The increase is largely attributable<br />
to the positive contribution of <strong>Fiat</strong> Auto and Iveco. Revenues<br />
also increased at CNH and the Components and Production<br />
Systems Business Area.<br />
<strong>Report</strong> on Operations Financial Review of the Group 25