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Fiat net profit soars as automaker promises first dividend since 2002

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Fiat SPA reported Thursday that its net profit soared in the fourth quarter as the core auto division posted a nearly five-fold earnings gain, allowing it to pay a dividend for the first time since 2002 to cap its turnaround.

The Turin-based maker of cars and trucks said net profit in the fourth quarter of 2006 ended Dec. 31 was 452 million euros (US$587 million), from 38 million euros a year earlier, lifted by one-time asset sales.

Earnings at the auto unit, which accounts for some 80 per cent of group earnings, jumped to 95 million euros ($123 million) in the fourth quarter from 21 million euros in the same period a year earlier on strong sales of its flagship compact car, the Grande Punto.

Chief executive Sergio Marchionne said core auto operations were profitable in the fourth quarter even without a contribution from Brazil, the firm's biggest market outside Europe and a hefty contributor to the auto unit's profitability in the first nine months of the year.

``We are now generating earnings outside of Brazil, which is an improvement,'' Marchionne said, speaking during a conference call with analysts.

Fiat shares, which have been gaining in recent weeks on earnings expectations and company news, fell 1.11 per cent to close at 15.9 euros ($20.65).

``I don't think the historic numbers are what matters,'' said Max Warburton, an analyst at UBS, which last week raised its earnings guidance on Fiat to 20 euros ($26) a share.

``There was nothing of controversy in the numbers. What matters are the promises for 2007 and 2008. The key thing is, can Fiat Auto continue to progress in Europe and in Brazil in 2007?''

Full-year 2006 net profit at Europe's sixth-largest automaker by sales was down 20 per cent from a year earlier, at 1.07 billion euros ($1.38 billion) from 1.33 billion in 2005, when more assets were sold.

Fiat also announced it will pay a dividend for the first time since 2002. The automaker intends to pay a total of 276 million euros ($358 million) in dividends across all share classes, with a dividend of 0.155 of a euro (20 cents US) per ordinary share. The dividends are subject to board approval at a meeting Feb. 20.

Revenue rose more than 11 per cent in 2006, reaching 52 billion euros ($67 billion), with a trading profit of two billion euros ($2.6 billion), double the 2005 levels, Fiat said. Fourth quarter revenue increased 5.5 per cent to 14 million euros ($18 million) from 13.1 million euros a year earlier.

The once-failing automaker, which makes cars under the Fiat, Lancia and Alfa Romeo brands as well as trucks and agricultural and construction vehicles, returned to profitability in 2005 under Marchionne, who took over in 2004.

Fiat noted that 2006 marked the end of the automaker's turnaround, achieved through ``a clean break with the past.''

Marchionne jettisoned non-core businesses, pursued a strategy of targeted alliances after exiting a broader alliance with General Motors Corp., and set an ambitious slate of new car releases.

On the strength of new releases, Fiat reported deliveries up 16.7 per cent but just shy of the two million target _ outperforming the overall market. Fiat increased deliveries by 17 per cent to 1.2 million units in a flat Western Europe market _ with sales in Italy and Germany four and five times higher, respectively, than the market demand _ and by 15 per cent in Brazil, where the market expanded by 13 per cent.

``All brands are up,'' Marchionne said.

Looking ahead, Fiat aims to roll out 23 new models through 2010 in a move to improve its mix and increase sales to 2.8 million a year. New cars due out in 2007 include the new Bravo, Fiat's attempt to get a foothold in the profitable mid-size market, which goes on sale Feb. 1, and the new Fiat 500, due out in September. Fiat has set sales targets of 120,000 units for both the Bravo and the 500.

Fiat announced this week that it is reorganizing its automobile business, creating four new companies for its auto brands and renaming the auto division Fiat Group Automobiles SPA. For some, the move suggested that Fiat may be preparing to spin off its auto business into a separately listed unit.

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Fiat net profit soars as automaker promises first dividend since 2002
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