• 29-APR-2016

2016 First Quarter Results

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CNH Industrial 2016 First Quarter Revenues of $5.4 Billion and Operating Profit of Industrial Activities of $178 Million; Improved Profitability in Three Out of Four Industrial Segments

Financial results presented under U.S. GAAP (1) (2)

  •  Continued demand strength in Commercial Vehicles segment (+18% in Europe) buffered impact from challenging trading conditions in Agricultural  Equipment  business
  •  Industrial Activities operating margin of 3.5%, with year-over-year operating profit and margin improvements achieved in Commercial Vehicles,  Construction  Equipment and Powertrain businesses
  •  Agricultural Equipment operating margin at 4.2% despite significant underproduction in NAFTA row crop sector
  •  Net industrial debt of $2.5 billion, with industrial operations cash flow improved by $375 million as compared to Q1 2015
  •  Full year guidance reaffirmed

London (UK) – (April 29, 2016) CNH Industrial N.V. (NYSE:CNHI / MI:CNHI) today announced consolidated revenues of $5,372 million for the first quarter 2016, down 5.7% compared to the first quarter 2015 on a constant currency basis (down 9.9% on a reported basis). Net sales of Industrial Activities were $5,076 million in Q1 2016, down 5.7% compared to the same period in 2015 on a constant currency basis (down 9.8% on a reported basis). Operating profit of Industrial Activities was $178 million for the first quarter, a $45 million decrease compared to the same period in 2015, with an operating margin of 3.5%, down 0.5 p.p. compared to the first quarter 2015. “Given market conditions, we are pleased with the performance of our operating segments this quarter,” said Richard Tobin, Chief Executive Officer of CNH Industrial. “While we continue to navigate challenging trading conditions in the agricultural equipment industry, we are encouraged by the improved operating profits and margins in our other industrial segments compared to last year.”

Net loss was $513 million for the quarter, or -$0.38 per share, after recording the previously announced exceptional non-tax deductible charge of $502 million related to the investigation of the Company’s wholly-owned subsidiary, Iveco S.p.A., and its competitors by the European Commission for certain alleged anticompetitive practices and related matters. Adjusted net income, which excludes this exceptional charge and restructuring expenses, was $1 million for the quarter.

(1) CNH Industrial reports quarterly and annual consolidated financial results under U.S. GAAP and EU-IFRS. The tables and discussion related to the financial results of the Company and its segments shown in this press release are prepared in accordance with U.S. GAAP. Financial results under EU-IFRS are shown in specific tables at the end of this press release.

(2) Refer to the Non-GAAP Financial Information section of this press release for information regarding Non-GAAP financial measures.

Given the losses in certain jurisdictions and the inability to book the related tax benefit, the Company recorded a tax charge in excess of its long-term effective tax rate (“ETR”) objective of between 34% to 36%.

Net industrial debt of $2.5 billion at March 31, 2016, was $0.9 billion higher than at December 31, 2015, including a $0.2 billion negative foreign exchange translation impact. Net industrial cash flow was a net outflow of $0.6 billion in the first quarter 2016, a $0.4 billion improvement over the same period last year. As of March 31, 2016, available liquidity was $8.2 billion, up $1.0 billion compared to March 31, 2015.

Segment Results

Agricultural Equipment’s net sales decreased 13.6% for the first quarter 2016 compared to the same period in 2015 on a constant currency basis, as a result of unfavorable industry volume and product mix in the row crop sector in NAFTA and the Brazilian market in LATAM. Net sales increased in EMEA and APAC, mainly driven by favorable volume in Australia.

Operating profit was $90 million for the first quarter ($204 million in the first quarter 2015). Operating margin decreased 3.7 p.p. to 4.2%, mainly due to unfavorable volume, industrial absorption and product mix in NAFTA and LATAM, partially offset by disciplined pricing and lower material costs.

Construction Equipment’s net sales decreased 8.1% for the first quarter 2016 compared to the same period in 2015 on a constant currency basis, due to negative volume and mix primarily in NAFTA and LATAM.

Operating profit was $14 million for the first quarter 2016, a $14 million increase compared to Q1 2015, with an operating margin of 2.6%. Construction Equipment’s operating profit increased as a result of improved margins in NAFTA and APAC more than offsetting the negative effects of challenging trading conditions in LATAM.

Commercial Vehicles’ net sales increased 5.3% for the first quarter 2016 compared to the same period in 2015 on a constant currency basis, primarily as a result of favorable truck volume in EMEA. In LATAM, net sales decreased 52.6% due to lower industry volumes in Brazil and Argentina. In APAC, net sales decreased, mainly for buses.

Operating profit was $38 million for the first quarter (operating margin of 1.9%). This represents a $37 million increase compared to Q1 2015, or a $49 million increase excluding the $12 million operating profit of our Venezuelan subsidiary recorded in Q1 2015 before the currency re-measurement in the second half of 2015. The increase was a result of improved volume and mix, positive pricing across all regions, and lower product costs. In EMEA, the increase was mainly due to favorable volume in trucks and buses. In LATAM, operating profit was flat as cost containment actions offset the effect of lower volumes due to market declines. In APAC, operating profit was positive due to truck pricing offsetting lower bus volumes.

Powertrain’s net sales increased slightly in the first quarter 2016 compared to the same period in 2015 on a constant currency basis. Sales to external customers accounted for 44% of total net sales (47% in Q1 2015).

Operating profit was $53 million for the first quarter, a $17 million increase compared to the first quarter 2015, with an operating margin of 6.0%, up 2.0 p.p. over the same period in 2015. The improvement was mainly due to positive product mix and industrial efficiencies.

Financial Services’ revenues totaled $388 million in the first quarter 2016, flat compared to the first quarter 2015 on a constant currency basis. In the first quarter 2016, retail loan originations (including unconsolidated joint ventures) were $1.9 billion, down $0.1 billion compared to the first quarter 2015 on a constant currency basis, primarily due to the decline in Agricultural Equipment sales. The managed portfolio (including unconsolidated joint ventures) of $24.9 billion as of March 31, 2016 (of which retail was 65% and wholesale 35%) was down $0.6 billion compared to December 31, 2015 on a constant currency basis, primarily in NAFTA and EMEA.

Net income was $87 million for the first quarter 2016, an increase of $2 million over the same period in 2015, with improved net interest margin more than offsetting slightly higher provision for credit losses and the negative impact of currency translation.

2016 Outlook

Trading conditions in Agricultural Equipment continue to remain challenging particularly in the row crop industry in NAFTA and in LATAM, while EMEA agricultural equipment markets are expected to be flat. The commercial vehicles industry is expected to increase between 5% and 10% in EMEA; trading conditions in LATAM are expected to remain challenging. CNH Industrial is confirming its 2016 guidance as follows:

  •  Net sales of Industrial Activities between $23 billion and $24 billion, with an operating margin of Industrial Activities between 5.2% and 5.8%;
  •  Net industrial debt at the end of 2016 between $1.5 billion and $1.8 billion, excluding any potential cash payment as a result of the European Commission investigation and related matters.