The Fiat Group in 1999 - Report on Operations - Fiat SpA

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In particular:
❚ Teksid closed the fiscal year with operat<strong>in</strong>g <strong>in</strong>come of 76
million euros (4.5% of revenues), compared with 42 million
euros <strong>in</strong> 1998 (3.6% of revenues), reflect<strong>in</strong>g the positive
contribution of its new bus<strong>in</strong>esses (Meridian and former
Renault operations) and the beneficial impact of successful
efficiency measures.
❚ At Magneti Marelli operat<strong>in</strong>g <strong>in</strong>come almost doubled to
108 million euros (2.7% of revenues, compared with 1.5%
<strong>in</strong> 1998) thanks to efficiency programs that produced a
significant reduction <strong>in</strong> overhead, and to the ga<strong>in</strong>s earned
on the disposal of surplus real estate assets.
❚ Comau/Pico earned 43 million euros (2.5% of revenues) on
an operat<strong>in</strong>g basis, compared with a loss of 1 million euros
<strong>in</strong> 1998 (-0.1% of revenues). This improvement was made
possible by the contribution of newly consolidated activities
and a reduction <strong>in</strong> overhead.
❚ <strong>Fiat</strong>Avio reported operat<strong>in</strong>g <strong>in</strong>come of 109 million euros
(8% of revenues), up from 60 million euros (4.4% of
revenues) <strong>in</strong> 1998, ow<strong>in</strong>g to favorable price trends,
advantageous foreign exchange rates and a good
performance by its Space Bus<strong>in</strong>ess Unit.
❚ At 13 million euros (3.5% of revenues), <strong>Fiat</strong> Ferroviaria‘s
operat<strong>in</strong>g <strong>in</strong>come was less than <strong>in</strong> 1998 (18 million euros,
4.6% of revenues), ma<strong>in</strong>ly as a result of an unfavorable
mix of <strong>in</strong>ternational orders.
<strong>The</strong> performance of the other Sectors is reviewed below:
❚ Toro Assicurazioni reported an operat<strong>in</strong>g loss of 103
million euros, which represents a substantial improvement
over the correspond<strong>in</strong>g period <strong>in</strong> 1998 (loss of 168 million
euros). As it is well known, the operat<strong>in</strong>g result of <strong>in</strong>surance
companies is generally negative for structural reasons.
Income before taxes, which is a more mean<strong>in</strong>gful gauge
of the Sector’s profitability, totaled 178 million euros (116
million euros <strong>in</strong> 1998). <strong>The</strong> ga<strong>in</strong> over 1998 reflects higher
premium <strong>in</strong>come, lower operat<strong>in</strong>g costs and the positive
contribution of the <strong>in</strong>vest<strong>in</strong>g activities.
❚ Itedi earned 17 million euros (4.1% of revenues) on an
operat<strong>in</strong>g basis, about the same as <strong>in</strong> 1998 (19 million
euros or 4.3% of revenues).
Result for the fiscal year
Income before taxes totaled 1,024 million euros <strong>in</strong> <strong>1999</strong>,
compared with 1,442 million euros <strong>in</strong> the previous fiscal year.
Two factors were ma<strong>in</strong>ly responsible for this decl<strong>in</strong>e: a less
favorable balance <strong>in</strong> the f<strong>in</strong>ancial <strong>in</strong>come and expense
equation (net f<strong>in</strong>ancial <strong>in</strong>come of 121 million euros <strong>in</strong> 1998,
but net f<strong>in</strong>ancial expenses of 458 million euros <strong>in</strong> <strong>1999</strong>);
and the absence of the nonrecurr<strong>in</strong>g ga<strong>in</strong> recorded <strong>in</strong> 1998
as a result of a change <strong>in</strong> the account<strong>in</strong>g pr<strong>in</strong>ciple on deferred
taxes. A detailed analysis of this item is provided <strong>in</strong> the Notes
to the Consolidated F<strong>in</strong>ancial Statements.
<strong>The</strong> <strong>in</strong>crease <strong>in</strong> net f<strong>in</strong>ancial expenses results from the less
favorable average f<strong>in</strong>ancial position that developed as the
<strong>Group</strong> deployed substantial resources to fund the acquisitions
completed dur<strong>in</strong>g the year. It also reflects a decrease <strong>in</strong> the
net f<strong>in</strong>ancial <strong>in</strong>come earned by the <strong>Group</strong>’s <strong>in</strong>surance
companies, which found lower <strong>in</strong>vestment yields available
for their liquid assets.
Even though <strong>in</strong>come before taxes decreased, the total tax
burden at the consolidated level rema<strong>in</strong>ed practically
unchanged from 1998. This was due to the impact of Italian
tax laws, which do not allow the consolidation of the tax
position of the various <strong>Group</strong> companies, offsett<strong>in</strong>g the tax
liability of profitable companies aga<strong>in</strong>st the losses <strong>in</strong>curred
by those that reported a loss.
A breakdown of <strong>1999</strong> tax charges is as follows:
❚ Current <strong>in</strong>come taxes for the fiscal year of 407 million euros
(433 million euros <strong>in</strong> 1998).
❚ Deferred tax assets of 90 million euros attributable to the
fiscal year (129 million euros <strong>in</strong> 1998).
❚ IRAP (Regional Tax on Production Activities) total<strong>in</strong>g
201 million euros (222 million euros <strong>in</strong> 1998).
Net Income
(<strong>in</strong> millions of euros)
<strong>Group</strong>
M<strong>in</strong>ority
302
1,248
1,550
1997
295
621
916
1998
153
353
506
<strong>1999</strong>