Italian carmaker Fiat-Chrysler surprised the market with lower 2012 profit targets that were still better than expected, sparking a share rally as investors shrugged off the threat of a weakening European economy that saw it cut its revenue outlook.
Fiat-Chrysler cut its trading profit forecast to between 3.8 and 4.5 billion euros for 2012, higher than the 3.18 billion euros analysts predicted. Guidance for 2012 net profit of 1.2-1.5 billion euros beat market consensus of 1.03 billion.
The carmaker cut its 2012 revenue target to about 77 billion euros to reflect slowing demand for cars as austerity measures hit the European economy. Fiat-Chrysler's previous 2012 revenue target had been 85 billion euros. A cut in targets had been widely flagged by the company.
Recent events in the last 12 months, and more particularly in the last semester of 2011, have cast doubt on the volume assumptions governing the overall market and our own development plans for Europe until 2014, the automaker said.
Fiat-Chrysler uses the term trading profit to refer to operating profit, minus restructuring costs, gains from investments and other income.
(Fiat gave) a very strong guidance with net profit guidance some 30 percent above consensus, a Milan fund manager said.
Its net profit for 2011 was 684 million euros, compared to 342 million the year before. The 2011 figure included results from Chrysler for the past two quarters.
Fiat-Chrysler reported a fourth quarter trading profit of 765 million, bang in line with forecasts, as its U.S. operations at Chrysler contributed 639 million euros.
Chrysler earlier said it swung to a full-year net income of $183 million, and made the bold prediction that profit would be eight times higher in 2012, on strong sales in its main U.S. market.
The Italian carmaker took over management of Chrysler under a 2009 bailout deal with the U.S. government, and now has a 58.5 percent stake.
Chrysler's return to profit offset weakness at Fiat Group Automobiles (FGA), as the unit grouping Fiat, Lancia and Alfa Romeo brands fell into a trading loss of 15 million -- much worse than then the 105 million euros profit expected.
FGA's fourth-quarter loss was a reflection of smaller sales volumes, and came as the passenger car market fell 3.4 percent in Europe and 9.6 percent in Italy, the company said.
Fiat-Chrysler said it would not pay a 2011 dividend for ordinary shares, because of a desire to maintain a high level of liquidity among other factors. It will pay 40 million euros in dividends for preference and savings shares.
The company had total available liquidity of 20.7 billion euros on hand at the end of 2011, which is a sufficient cushion to help it ride out a sharper than expected market drop.
Shares rose 6.2 percent after being briefly suspended following the results. The stock was up 3 percent at 1327 GMT.
(Reporting by Jennifer Clark; Additional reporting by Stephen Jewkes; Editing by Helen Massy-Beresford)