Fiat posts a profit after four years

In a statement issued on Monday, Fiat said its key Fiat Auto unit had a quarterly trading profit of 21 million euros ($25.4 million) compared with a year-ago loss of 156 million adjusted to International Accounting Standards (IAS) and with an average analyst forecast of 8.5 million.

It is the first time in four years that the Italian company has made a profit.

Ferrari president Luca di Montezemolo is also Fiat's president. The Italian stepped in to help the ailing Turin-based company two years ago.

"I would like to express great satisfaction for the results we have communicated today," said di Montezemolo. "In life you must always look forward, but it's also useful to see where you started from.

"We have exceeded all targets set by CEO Sergio Marchionne in 2004. The group closes 2005 by going back to profit and all sectors of the group have closed with a clear improvement compared to 2004."

Chief Executive Sergio Marchionne has been trimming costs and striking alliances with other carmakers such as Ford Motor Co to pull the Auto unit back to profit.

The new Punto model made its debut in September, and Fiat aims to sell 360,000 units this year but will face tougher competition when rivals such as Peugeot and Opel launch their own city car models.

Taking advantage of the turnaround, Fiat said it planned to issue a seven-year bond with size and price dependent on market conditions. Last week, Marchionne said the firm would not need a bond in the first half of 2006.

Group net industrial debt - the headline debt figure under the new accounting rules - dropped to 3.219 billion euros by end-December from 9.447 billion at the end of 2004.

"At a first glance, the debt figure looks under control, and that's positive," a trader said.

Auto revenues for the fourth quarter rose to 5.562 billion euros from 5.398 billion in the year-ago period.

Fiat said group trading profit in the quarter was 361 million euros, compared with a loss of 125 million euros a year ago and beating the forecast of 276 million.

Fiat said in its statement it confirmed its 2006 targets, which are for positive operating cash flow, trading profit of between 1.6 billion and 1.8 billion euros and net income of about 700 million euros.

It said market demand was expected to be "essentially flat".

Carmakers, saddled with chronic overcapacity, are facing slow growth in major markets, intense price competition and a spike in raw materials costs, which weigh heavily on operating margins.

Fiat's major European competitors have not yet reported results, while U.S. carmakers who sell models in Europe have been reporting a mixed bag so far for the fourth quarter.