• 30-JAN-2018

CNH Industrial reported 2017 consolidated revenues up 10% to $27.4 billion, net income at $313 million, with adjusted net income(2)(3) at $669 million or $0.48 per share. Net industrial debt(2)(3) reduced to $0.9 billion

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

Industrial Activities’ revenues up 11% (up 9% on a constant currency basis), with solid growth in all segments

Operating profit(2)(3) of Industrial Activities increased 18% to $1,519 million, with an operating margin of 5.8%, as a result of positive performances in the Agricultural Equipment, Powertrain and Construction Equipment segments

Adjusted net income increased to $669 million (up 39%) in full year 2017, with adjusted diluted EPS(2)(3) of $0.48

Net industrial debt was $0.9 billion at December 31, 2017, a 45% reduction compared to December 31, 2016

The Board of Directors is recommending a dividend of €0.14 per common share, or approximately €191 million (~$237 million), an increase of 27%.
The Board of Directors will also be recommending a reauthorization and upsizing of the Company’s share repurchase program to $700 million

For 2018, CNH Industrial expects net sales of Industrial Activities between $27 billion and $28 billion and an increase of 30% of adjusted diluted EPS to between $0.63 and $0.67. Net industrial debt expected between $0.8 billion and $1.0 billion

London (UK) – (January 30, 2018) CNH Industrial N.V. (NYSE:CNHI / MI:CNHI) today announced consolidated revenues of $27,361 million for the full year 2017, up 10% compared to 2016. Net sales of Industrial Activities were $26,168 million for the year, up 11% compared to 2016. In the fourth quarter of 2017, consolidated revenues were $8,102 million, up 16% compared to the fourth quarter of 2016. Net sales of Industrial Activities were $7,798 million for the fourth quarter of 2017, up 17% compared to the fourth quarter of 2016. Net income was $313 million for the full year 2017 and includes a non-cash pre- and after-tax charge of $92 million due to the deconsolidation of CNH Industrial’s Venezuelan operations effective December 31, 2017; a non-cash tax charge of $123 million due to the U.S. Tax Cuts and Jobs Act (the “U.S. Act”) and tax legislation changes in the UK and certain other countries enacted in the fourth quarter of 2017, as disclosed in our press release of January 25, 2018; as well as a total pre-tax charge of $64 million (total after-tax charge of $55 million) related to the repurchase/early redemption of certain notes in 2017.

Adjusted net income was $669 million for the full year 2017 compared to $482 million in 2016. Adjusted diluted EPS in 2017 was $0.48, up 37% compared to 2016. For the fourth quarter of 2017, net loss was $40 million and, as mentioned above, was affected by the $92 million charge for Venezuelan operations deconsolidation, the $123 million charge due to the U.S. Act and other tax legislation changes, as well as a $8 million charge on early redemption of notes. The  adjusted net income was $197 million for the quarter, flat compared to the fourth quarter of 2016. Adjusted diluted EPS in the fourth quarter of 2017 was $0.14, flat compared to the fourth quarter of 2016.

Operating profit of Industrial Activities was $1,519 million for the full year 2017 compared to $1,291 million in 2016, with an operating margin of 5.8%, up 0.3 percentage points (“p.p.”) compared to 2016. In the fourth quarter of 2017, operating profit of Industrial Activities was $468 million, compared to $412 million in the fourth quarter of 2016, with an operating margin of 6.0% (6.2% in 2016).

For the full year 2017, income taxes were $455 million ($298 million in 2016), including the $123 million non-cash tax charge. Adjusted income taxes(1)(2) for the full year 2017 were $348 million ($265 million in 2016). The adjusted effective tax rate (adjusted ETR)(1)(2)  improved by 2 p.p. to 37%, when compared to 2016. For 2018, we expect the adjusted ETR to be in the range of 30% to 32%, reflecting the positive impact of the recently enacted rate reductions in the U.S. and several other jurisdictions.

Net industrial debt was reduced to $0.9 billion at December 31, 2017, down $1.7 billion and $0.7 billion compared to September 30, 2017, and December 31, 2016, respectively, as a result of strong cash flow performance mainly arising from reduced working capital levels. Total debt was $25.9 billion at December 31, 2017, up $0.6 billion compared to December 31, 2016, with third party debt in Industrial Activities down $0.2 billion from December 31, 2016 to $6.5 billion (or down $0.8 billion at constant currency). At December 31, 2017, available liquidity(1)(2) was $9.4 billion, up $0.6 billion compared to December 31, 2016.

During the quarter, CNH Industrial N.V. issued $500 million in aggregate principal amount of 3.850% Notes due 2027. This was the first bond issued after the Company’s securities became eligible for the main investment grade indices in the U.S. market (following the assignment of the investment grade rating from Fitch and the upgrade to investment grade from S&P). This is the first 10-year term public bond ever issued by the Company.

Agricultural Equipment’s net sales increased 10% for the full year 2017 compared to 2016 (up 8% on a constant currency basis). In LATAM, the increase was mainly due to higher industry volume, market share gains, a favorable mix of higher horsepower products and net price realization. Net sales increased in APAC mainly driven by favorable volume in Australia, Russia and South East Asia. In EMEA, net sales increased due to higher industry volume, a favorable product mix and net price realization. In NAFTA, net sales decreased as a result of de-stocking actions in our dealer network, primarily with the high horsepower tractors and the hay and forage product lines. NAFTA industry volumes were flat overall, with the row crop sector higher, offset by lower livestock sector volumes. In the fourth quarter of 2017, Agricultural Equipment’s net sales increased 15% compared to the fourth quarter of 2016 (up 11% on a constant currency basis). Net sales increased in EMEA, primarily driven by higher combine sales in preparation of the 2018 season and positive price realization. Net sales also increased in APAC and in LATAM. In NAFTA, net sales were flat.

Full year 2017 operating profit was $949 million, a 16% increase compared to $818 million in 2016, mainly due to the favorable volume and product mix in all regions except NAFTA. One percent net price realization more than offset increases in raw material cost and unfavorable foreign exchange fluctuations. Agricultural Equipment also increased spending in research and development, primarily related to our new precision farming solutions, and in selling, general and administrative expenses, primarily associated with the increased sales activity. Operating margin increased 0.4 p.p. to 8.5%. In the fourth quarter of 2017, operating profit was $279 million ($272 million in the fourth quarter of 2016), with an operating margin of 8.6% (operating margin of 9.6% in the fourth quarter of 2016). Favorable volume, net price realization and lower warranty costs were partially offset by an unfavorable product mix, higher manufacturing costs in EMEA as a result of the transition to new regulatory requirements and an overall increase in research and development spending. 

Construction Equipment’s net sales increased 14% in the full year 2017 compared to 2016 (up 13% on a constant currency basis), due to higher industry volume in all regions except EMEA, and net price realization, primarily in NAFTA and LATAM. In the fourth quarter of 2017, net sales increased 36% compared to the fourth quarter of 2016 (up 33% on a constant currency basis), driven by market growth in all regions.

Full year 2017 operating profit was $21 million compared to $2 million in 2016, with an operating margin of 0.8% (up 0.7 p.p. compared to 2016). The increase was due to higher volume including a positive overhead absorption and net price realization, partially offset by increases in raw material cost, unfavorable foreign exchange impacts on product components, and increased production costs. In the fourth quarter of 2017, operating profit was $13 million compared to an operating loss of $30 million in the fourth quarter of 2016. Higher industry volume and positive price realization, partially offset by ramp-up costs to accommodate increased production (up more than 50% in the quarter compared to the fourth quarter of 2016), to meet retail sales in the quarter, led to these improved results. Operating margin increased 6.9 p.p. to 1.7%. The global order book in Construction Equipment remains solid with an increase year-over-year of over 30%.

Commercial Vehicles’ net sales increased 9% in the full year 2017 compared to 2016 (up 7% on a constant currency basis) as result of higher truck and bus sales in EMEA, higher volume and mix in APAC, and recovering truck sales in LATAM, mainly in Argentina. In the fourth quarter of 2017, net sales increased 15% compared to the fourth quarter of 2016 (up 8% on a constant currency basis). In EMEA and APAC, net sales increased primarily as a result of higher volume and favorable mix. In LATAM, net sales were flat.

Full year 2017 operating profit was $272 million compared to $333 million in 2016, with an operating margin of 2.6% (down 0.9 p.p. compared to 2016). Operating profit increased in LATAM and APAC, mainly due to higher volume and favorable pricing. In EMEA, operating profit decreased as favorable volumes were more than offset by unfavorable mix, primarily associated with fleet-related channel sales, Euro 6 emission content costs, and the negative impact of the British pound devaluation. Increased spending in research and development on new product programs was more than offset by favorable manufacturing efficiencies. In the fourth quarter of 2017, operating profit was $94 million ($131 million in the fourth quarter of 2016), with an operating margin of 2.9% (down 1.8 p.p. compared to the fourth quarter of 2016). Favorable volume was more than offset by unfavorable mix, primarily associated with fleet-related channel sales, increases in product content costs and new product introductions, higher spending in research and development, and the unfavorable impact of the British pound devaluation. 

Powertrain’s net sales increased 18% in the full year 2017 compared to 2016 (up 16% on a constant currency basis), due to higher volumes. Sales to external customers accounted for 48% of total net sales (47% in 2016). In the fourth quarter of 2017, net sales increased 22% compared to the fourth quarter of 2016 (up 13% on a constant currency basis), due to higher sales volumes to both captive and external customers.

Full year 2017 operating profit was $362 million, a $130 million increase compared to 2016, with an operating margin of 8.3%, up 2.0 p.p. compared to 2016. The improvement was due to higher volumes and manufacturing efficiencies. In the fourth quarter of 2017, operating profit was $102 million, a $41 million increase compared to the fourth quarter of 2016, as result of higher volumes, favorable mix and manufacturing efficiencies. Operating margin increased 2.4 p.p. to 8.8%, the highest quarterly margin ever reported in Powertrain’s history, reflecting the profitability of a well-balanced portfolio of engine applications.

Financial Services’ revenues totaled $1,625 million in the full year 2017, an increase of 4% compared to 2016 (up 1% on a constant currency basis), due to higher activity in all regions except NAFTA. In the fourth quarter of 2017, revenues totaled $420 million, an increase of 6% compared to the fourth quarter of 2016 (up 3% on a constant currency basis).

In 2017, retail loan originations (including unconsolidated joint ventures) were $9.1 billion, flat compared to 2016. The managed portfolio (including unconsolidated joint ventures) of $26.8 billion as of December 31, 2017 (of which retail was 61% and wholesale 39%) increased $2.0 billion compared to December 31, 2016. Excluding the impact of currency translation, the managed portfolio increased $0.6 billion compared to 2016. 

Full year 2017 net income was $452 million, a $118 million increase compared to 2016 primarily attributable to an improvement in income taxes as a result of the revaluation of deferred tax liabilities following the U.S. Act enactment. Excluding the favorable tax impact, net income was flat compared to 2016, as stronger performances in the EMEA, LATAM and APAC regions were offset by a weaker result in NAFTA. In the fourth quarter of 2017, net income was $192 million, an increase of $109 million compared to the fourth quarter of 2016, mainly attributable to the revaluation of the U.S. deferred tax liabilities. 

Dividends and Share Buy-back 

The Board of Directors of CNH Industrial N.V. intends to recommend to the Company’s shareholders a dividend of €0.14 per common share, representing an increase of 27% over the prior year dividend, and totaling approximately €191 million ($237 million). Subject to the approval of the upcoming Annual General Meeting (expected on April 13, 2018), the ex-dividend date would be set at April 23, 2018. 

The Board of Directors also intends to recommend to the Company’s shareholders the renewal of the authorization to repurchase up to a maximum of 10% of the Company’s issued common shares. After such authorization and subject to general and market conditions, the Company intends to launch a buy-back program up to $700 million, representing an increase of $400 million versus the current program.

Neither the renewal of the authorization, nor the launch of the program obliges the Company to repurchase any common shares and the program may be suspended, discontinued or modified at any time for any reason and without previous notice, in accordance with applicable laws and regulations.

2018 Outlook

Worldwide demand for agricultural equipment is expected to improve with all regions flat to up 5% on average. Farm incomes are expected to remain stable, leading to no significant changes in planted acreage. Construction equipment demand is forecasted to be up 5-10% in LATAM and APAC while remaining relatively flat to up slightly in EMEA and NAFTA. Commercial vehicle demand is expected to be up about 15% in LATAM and flat to slightly down in EMEA and APAC.

As a result of the forecasted improvement in product demand conditions, and the positive impact of changes in the Company’s capital structure, the Company is setting its full year 2018 guidance as follows:

Net sales of Industrial Activities of $27 billion to $28 billion;

Adjusted diluted EPS(1) of $0.63 to $0.67;

Net industrial debt at the end of 2018 at $0.8 billion to $1.0 billion.