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UPDATE 2-Fiat cuts 2013 financial targets as LatAm disappoints

Bernie Woodall and Jennifer Clark
Wednesday, 30 Oct 2013 | 10:45 AM ET

DETROIT/MILAN, Oct 30 (Reuters) - Italian automaker Fiat cut its 2013 financial targets on Wednesday as a third-quarter revenue slump in crucial Latin American markets offset a strong performance at Chrysler, the No.3 U.S. automaker it controls.

Fiat slashed the bottom end of its trading profit forecast to 3.5 billion euros ($4.8 billion) from 4.0 billion euros, saying that its third-quarter earnings took an 80 million euro hit from a weak Brazilian real.

Its trading profit - earnings before interest, tax and one-time items - in Latin America tumbled to 165 million euros in third quarter from 341 million euros a year ago.

Analysts were expecting a poor performance in Brazil, which usually accounts for about a quarter of Fiat's trading profit, because of the strong euro and the end of car sales incentives, but were surprised by the extent of the outlook cut.

They had pencilled in a full-year trading profit forecast cut to as low as 3.65 billion euros, according to a consensus published on Fiat's website.

As a result of the deeper-than-expected cut, Fiat's shares plummeted 5.7 percent in Milan after the earnings statement.

Fiat cut revenue guidance for the full year to about 88 billion euros, at the bottom of its previous range. It said it now sees trading profit at between 3.5 billion and 3.8 billion euros - placing the top end of its forecast in line with last year's figure of 3.81 billion euros.

Full-year net profit is now expected in the 900 million-1.2 billion euro range, well below last year's 1.4 billion euros.

However, its net loss in Europe - where mass market car makers are struggling with the lowest sales in 20 years - narrowed to 165 million euros in the third quarter. Last year Fiat lost 704 million euros in Europe.

The third-quarter earnings of both Fiat and Chrysler are being watched by analysts as an indication of the value Chrysler could fetch should an initial public offering (IPO) slated for early next year go ahead.

The stock market listing will take place if Fiat cannot resolve a dispute with a union-affiliated healthcare trust, which owns 41.5 percent of Chrysler, over the value of it stake.

CHRYSLER RESULTS BETTER THAN EXPECTED

Chrysler, which Fiat has controlled since 2009, said its net revenue rose 13.5 percent to $17.6 billion in the quarter, as strong sales of its pickup trucks and Jeep Grand Cherokee helped offset a delay in sales for the Jeep Cherokee.

Some analysts had been predicting that the Jeep Cherokee launch delay would hurt third-quarter results. The Cherokee began shipping to dealers last week.

Chrysler net profit for the third quarter rose 22 percent to $464 million. It confirmed its full-year sales forecast of $72 billion to $75 billion.

The company said it had shipped 593,000 vehicles in the quarter, up 6 percent from a year earlier.

The company's share of the U.S. market fell to 11.2 percent from 11.3 percent a year ago.

Richard Hilgert, analyst with Morningstar, said he is not concerned about the loss of market share "because they didn't have the Cherokee and they had the Liberty adding to their sales last year."

The Jeep Liberty is the vehicle Cherokee replaces in the Chrysler lineup. Hilgert pointed out that fourth-quarter's vehicle sales and earnings will likely be boosted in comparison with a year earlier because the decline in Liberty sales began in late 2012.

Chrysler's cash at the end of the quarter was $11.5 billion, compared with $11.9 billion at the end of the second quarter.