Fiat SpA's key automotive division is expected by analysts to post its second quarterly profit in a row next week, thanks to strong sales of new models like the Grande Punto in its home market, reports Gilles Castonquay for Reuters. Sales were so strong in the first quarter that Fiat exceeded its target of 30 percent of the Italian market in the first three months of the year. They also encouraged investors, who saw the numbers as sign that the industrial group was succeeding in recovering from its worst crisis in history in 2003.

Since March, Fiat's stock has been trading above 10 euros, a level last seen before the crisis. On Friday, it ended 1.31 percent lower at 11.14 euros in Milan. The strong sales figures recently prompted Chief Executive Sergio Marchionne to speculate to journalists that the auto division could surpass its operating profit target of 100 million euros for the year. But analysts said Fiat would face a harder time later this year as competitors rolled out their latest models. Renault is coming out with its Clio, PSA Peugeot Citroen with its 207, and Opel of General Motors Corp. with its Corsa. "Fiat is doing well, but the competition will intensify," said J.P. Morgan analyst Philippe Houchois. "It is still a story with an element of risk."

Fiat is to report its results on May 3 at 0830 GMT at the earliest. It is holding its annual shareholders' meeting later that day. Among the European automakers to report full or partial results, both Volkswagen AG and PSA Peugeot Citroen missed expectations despite posting higher numbers. Renault, however, surprised the market with a higher than expected sales growth.

SECOND TIME RUNNING

Fiat's auto division is expected to post a trading profit of 40 million euros against a loss of 166 million euros for the same period a year ago, according to an average of the forecasts of 25 analysts compiled by Fiat and obtained by Reuters. In the fourth quarter, the division reported a trading profit of 21 million euros after 17 successive quarterly losses.
 

As a group, which includes businesses such as farm equipment maker CNH Global NV, Fiat is seen reporting a trading profit of 300 million euros for the first quarter against 47 million euros for the same period a year earlier. Trading profit resembles operating profit. At the net profit level, the group is seen posting a total of 100 million euros against 295 million euros, which excluded a gain from a payment by GM to end a tempestuous partnership.

Abaxbank analyst Gabriele Parini said Fiat might make use of the occasion to announce plans to resolve a number of outstanding issues. Fiat wants to form yet another industry alliance after entering into partnerships with the likes of Ford Motor Co. and India's Tata Motors Ltd., among others, to share the cost of production and distribution. It is looking for a new partner for Fidis Retail, its consumer finance business, in which it has an option to buy out group of banks owning 51 percent.

It is also helping Mediobanca find a way to rid itself of its 11.7-percent stake in Ferrari, the luxury sports car maker. Although Marchionne has deemed it too early to decide on whether to buy out minorities in CNH Global after Fiat raised its stake in it to 90 percent, the market has kept speculating on such a move as well as on an eventual delisting of CNH Global.

Report courtesy of Reuters