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

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ROLLING STOCK AND RAILWAY
SYSTEMS — FIAT FERROVIARIA
Highlights
(<strong>in</strong> millions of euros) <strong>1999</strong> 1998 1997
Net revenues 375 389 384
Operat<strong>in</strong>g <strong>in</strong>come 13 18 26
As a % of revenues
Income (loss) before
3.5 4.6 6.7
m<strong>in</strong>ority <strong>in</strong>terest 3 (1) 14
Cash flow 18 15 30
Capital expenditures 11 12 14
Research and development 9 9 9
Net <strong>in</strong>vested capital 29 94 90
Number of employees 2,109 2,294 2,401
GROWTH STRATEGIES
Dur<strong>in</strong>g <strong>1999</strong>, the Italian roll<strong>in</strong>g stock market was characterized
by diverg<strong>in</strong>g trends. While <strong>in</strong>vestments by the Italian State
Railways were stagnant, sales of urban transport systems
rema<strong>in</strong>ed relatively healthy.
Outside Italy, demand was flat <strong>in</strong> the Sector’s target markets.
Aga<strong>in</strong>st this background, the <strong>Fiat</strong> Ferroviaria received orders
for 14 additional low-rise trams from ATAC, <strong>in</strong> Rome. It was
also asked to supply the electrical equipment for 11 tra<strong>in</strong>s
used on the MM2 and MM3 l<strong>in</strong>es of the Milan subway system.
Toward the end of the year, it was awarded a contract for
the supply of 15 trams to the municipality of Mess<strong>in</strong>a, and
is currently participat<strong>in</strong>g <strong>in</strong> a call for tenders issued by the
municipal transit agency (ATM) of Tur<strong>in</strong> for the supply of
100 trams.
<strong>The</strong> Sector’s order portfolio amounted to 1,288 million euros
as of December 31, <strong>1999</strong> (1,599 million euros at the end of
1998).
RESULTS FOR THE YEAR
Revenues totaled 375 million euros <strong>in</strong> <strong>1999</strong>, slightly less than
<strong>in</strong> the previous fiscal year.
Operat<strong>in</strong>g <strong>in</strong>come was 13 million euros (3.5 % of revenues),
down from 18 million euros (4.6% of revenues) <strong>in</strong> 1998. This
decl<strong>in</strong>e was due primarily to the impact of orders booked
under extremely competitive conditions.
<strong>The</strong> Sector reported net <strong>in</strong>come of 3 million euros, compared
with a loss of 1 million euros <strong>in</strong> 1998, reflect<strong>in</strong>g lower
extraord<strong>in</strong>ary expenses attributable to the implementation of
the new account<strong>in</strong>g pr<strong>in</strong>ciple on deferred taxes. <strong>The</strong> Sector’s
<strong>in</strong>terest <strong>in</strong> net <strong>in</strong>come amounted to 1 million euros (loss of 2
million euros <strong>in</strong> 1998). Cash flow was 18 million euros (15
million euros a year earlier).
<strong>The</strong> return on average net <strong>in</strong>vested capital was significantly
higher than the target level needed to create value.