2013 Full Year and Fourth Quarter Results
CNH INDUSTRIAL 2013 NET REVENUES OF €25.8 BILLION, TRADING PROFIT OF €2.0 BILLION, NET PROFIT OF €917 MILLION (+2%)
- Net revenues totaled €25.8 billion, in line with 2012; on a constant currency basis revenues increased 4.3%.
- Trading profit for the year was €1,985 million, with trading margin of 7.7%. On a constant currency basis, trading profit was in line with 2012. · Net profit increased 2% to €917 million (€900 million in 2012).
- Net industrial debt stood at €1,592 million (€1,642 million at December 31, 2012). Group available liquidity totaled €6.3 billion (€6.2 billion at December 31, 2012).
- The Board of Directors is recommending for 2013 a dividend of €0.20 per share, totaling approximately €270 million.
- CNH Industrial expects improved performance in 2014, with revenues flat to up 5% and trading margin between 7.8% and 8.2%. Net industrial debt expected between €1.5 billion and €1.7 billion.
The financial results presented in this press release have been prepared in accordance with IFRS and relate to CNH Industrial Group after the merger between Fiat Industrial S.p.A. and CNH Global N.V., completed on September 29, 2013. The merger had no impact on the activities of the former Fiat Industrial Group and therefore the results presented herein are consistent and comparable with those previously published by Fiat Industrial. However, subsequent to the merger closing date, net profit and net equity that previously would have been attributed to the ex-CNH Global minority shareholders are now included in the profit and net equity attributable to owners of the parent.
London (UK) – (January 30, 2014) CNH Industrial N.V. (NYSE:CNHI / MI:CNHI) today announced Group revenues of €25,778 million for 2013 (+4.3% on a constant currency basis). Revenues from Agricultural and Construction Equipment were in line with the prior year at €16,006 million; on a constant currency basis, revenues increased by €759 million (+4.7%) as a result of the strong demand for Agricultural Equipment, partially offset by challenges faced by the Construction Equipment business. Trucks and Commercial Vehicles revenues were €8,752 million (+1.5% on a constant currency basis) as a result of a recovery in demand in Europe, largely due to the Euro V pre-buy effect mainly in Q4 2013, and increased volumes in LATAM. Powertrain revenues at €3,331 million (up 14.6% on a constant currency basis), were driven by higher volumes for both internal and external customers.
Group trading profit for the year was €1,985 million (trading margin of 7.7%), down €78 million largely as a result of negative exchange rates. On a constant currency basis, trading profit was in line with 2012 as higher volumes and positive mix in the Agricultural and Construction Equipment Segment and higher revenues and better capacity utilization for Powertrain compensated for Euro VI transitional costs and a less favorable product mix and pricing environment in the Trucks and Commercial Vehicles Segment.
Operating profit increased €22 million to €1,868 million in 2013 mainly as a result of reduced restructuring costs from the prior year.
Net financial expense totaled €463 million for 2013, compared with €467 million for 2012.
Income taxes totaled €590 million, representing an effective tax rate of 39% for the year, slightly above full year Group expectations mainly due to one time merger related impacts. For 2014, CNH Industrial Group expects an effective tax rate between 35% and 38%.
Group net profit was €917 million for 2013 (€900 million for 2012), or €0.63 per share (€0.65 for 2012).
Net industrial debt of €1,592 million at December 31, 2013 was €50 million lower than year-end 2012.
Available liquidity of €6,318 million, inclusive of €1,613 million in undrawn committed facilities, slightly increased over December 31, 2012.
For the fourth quarter, Group revenues totaled €6.9 billion, an increase of 4.2% on a constant currency basis (-1.1% on a reported basis) driven by positive performance for Agricultural Equipment, Powertrain and Trucks and Commercial Vehicles, partially offset by a decline in revenues for Construction Equipment due primarily to announced actions to realign dealer inventory to retail demand.
Group trading profit totaled €436 million for the fourth quarter (€435 million in the same period of 2012), with a trading margin of 6.3% (6.2% in Q4 2012). On a constant currency basis, trading profit increased by €21 million, as improved results for the Agricultural Equipment business, driven primarily by positive pricing and mix, more than offset lower profitability from negative volume/mix, inflationary cost increase and negative exchange rate impacts, both primarily in LATAM, affecting Trucks and Commercial Vehicles.
Operating profit was €388 million in Q4 2013, an increase of 8.4% compared with €358 million for the same period in 2012.
Net financial expense totaled €119 million for the quarter, a decrease of €14 million from the same period in 2012 mainly due to lower net foreign exchange expenses.
Net profit for the fourth quarter increased 9% to €170 million (€156 million for the same period in 2012), or €0.13 per share (€0.12 for the same period in 2012).
Significant events subsequent to December 31, 2013
On January 28, 2014, CNH Industrial and BNP Paribas Leasing Solutions, the two shareholders of CNH Industrial Capital Europe, agreed on the extension of the joint-venture services to CNH Industrial Trucks and Commercial Vehicles business in Italy, Germany, France, the United Kingdom and other major European markets. This extension has been approved by the French banking regulatory authority (ACPR). Prior to this agreement, the joint venture provided leasing and financing to CNH Industrial customers in the Agricultural and Construction Equipment businesses in Europe starting from 1997. The company currently finances over 40,000 customers in nine countries, for a total outstanding portfolio of €1.7 billion. As a result of this increase in scope, CNH Industrial Capital Europe is now the captive finance company for all CNH Industrial Group businesses in major European countries. CNH Industrial Capital Europe will henceforth use the CNH Industrial Capital and Iveco Capital brands for dealer and customer-oriented financing activities.
On the basis of estimated 2013 profit and retained earnings available for distribution by CNH Industrial N.V., and subject to formal Board approval of the Group’s 2013 financial statements on February 28, 2014, the Board of Directors of CNH Industrial N.V. intends to propose to Shareholders at the Annual General Meeting a dividend of €0.20 per common share, totaling approximately €270 million.
Projected improvements in operating performances in the Trucks and Commercial Vehicles and Construction Equipment businesses, coupled with continued industrial efficiencies, are expected to offset the projected decline in unit demand of agricultural product equipment forecasted for 2014. Accordingly, CNH Industrial is setting its 2014 guidance as follows:
- Revenues flat to up 5%;
- Trading margin between 7.8% and 8.2%; and
- Net industrial debt between €1.5 billion and €1.7 billion.
The Group will be releasing a new business plan in May of 2014 at an investor event to be held in the United States following the Q1 2014 results release. Prior to the release of the Q1 2014 results, the Group will be holding a conference call with analysts to present the changes from the 2014 transition from IFRS to US GAAP accounting standards and the change from the Euro to the US Dollar as the Group reporting currency, including a recast of prior years’ data.
Agricultural and Construction Equipment
Agricultural and Construction Equipment reported revenues of €16.0 billion for the year, in line with 2012 (up 4.7% on a constant currency basis) as strong demand for Agricultural Equipment continued to offset a challenging business environment in the Construction Equipment business. The geographic distribution of industrial net revenues for the year was 43% NAFTA, 28% EMEA, 18% LATAM, and 11% APAC. Agricultural Equipment full-year net revenues were up 3.6% over 2012 (up 9% on a constant currency basis) driven by positive net pricing, increased volumes and favorable product mix. All geographic regions except APAC reported increased revenue on a constant currency basis. Worldwide Agricultural Equipment market share performance was substantially flat for both tractors and combines. Worldwide Agricultural Equipment production was in line with retail sales during 2013 but 17% below retail sales for the fourth quarter, as the Group implemented the scheduled production slowdown to reduce company and dealer inventory to target year-end levels.
Construction Equipment net revenues decreased 16.4% over 2012 (down 11% on a constant currency basis), as continued weakness in most geographic regions was only partially offset by strength in LATAM. Worldwide Construction Equipment market share was substantially flat for both heavy and light equipment. Worldwide Construction Equipment production was 4% below retail sales for 2013, reflecting actions taken in Q4 to realign dealer inventory to retail demand.
Agricultural and Construction Equipment trading profit increased to €1,783 million for the year, up €229 million (+14.7%) from the prior year, with a trading margin of 11.1% (9.7% in 2012), reflecting positive pricing, mix and industrial productivity compared with 2012. Agricultural Equipment trading profit increased €214 million (+17.1%) over 2012 to €1,468 million and trading margin was 1.3 p.p. higher at 11.6%, as increased volumes, positive net pricing and reduced production costs more than offset increased R&D costs, primarily related to significant investments in new products and the launch of Tier 4B compliant products. Construction Equipment reported a trading loss of €83 million (€30 million loss for 2012) due mostly to lower volumes, partially offset by favorable pricing. Financial Services posted trading profit of €398 million, a €68 million increase over 2012, primarily reflecting the increase in the average portfolio and lower credit loss provisions.
For the fourth quarter, Agricultural and Construction Equipment reported revenues of €3.9 billion, +3% on a constant currency basis (-3.8% on a reported basis) thanks to a strong Agricultural Equipment performance, particularly in LATAM. Trading profit for the quarter was €298 million, an increase of €34 million (or 13%) over the same period in 2012, with a trading margin of 7.6% (trading margin of 6.5% for Q4 2012). Agricultural Equipment trading profit increased €14 million over Q4 2012 to €240 million, with a trading margin of 7.9% (7.3% in Q4 2012), as positive net pricing and mix more than offset negative effects of foreign exchange translation. Construction Equipment reported a trading loss of €41 million (€40 million loss for Q4 2012). Financial Services posted trading profit of €99 million, a €21 million increase over Q4 2012, primarily reflecting the increase in the average portfolio and lower credit loss provisions.
Trucks and Commercial Vehicles
Trucks and Commercial Vehicles reported full-year revenues of €8.8 billion, an increase of 1.5% on a constant currency basis (-1.9% on a reported basis). A modest recovery in demand in Europe, mainly in Q4 2013, and a sustained increase in LATAM were largely offset by the negative market mix of products sold, as well as reduced activity in the parts and services business.
During 2013, Trucks and Commercial Vehicles delivered a total of 135,709 vehicles (including buses and specialty vehicles), representing a 1% decrease from the prior year. The overall decrease was largely attributable to light vehicles, with deliveries down 7% for the year mainly to realign dealer inventory to retail demand. Volumes were up 16% for medium vehicles, 2% for heavy and 3% for buses. Deliveries were down 1% in EMEA and up 15% in LATAM.
The European truck market (GVW ≥3.5 tons) registered a 1.3% increase over 2012 to 659,400 units. Demand benefited from increased sales of Euro V vehicles in the heavy and medium categories (GVW >6.0 tons) during the second half of the year prior to the introduction of Euro VI emissions regulations in January 2014. By category, medium and heavy vehicle registrations were up 1.6% and 7.9%, respectively, for the full year, but down 2.6% for light vehicles (GVW 3.5-6.0 tons). The industry continued to experience large variations in demand across markets. The most significant growth was in the UK (+13.1%) and Poland (+13.3%). By contrast, there were continued contractions in Germany (-1.8%), France (-4.2%) and Italy (-13.1%).
Group share of the European truck market (GVW≥3.5 tons) remained stable year-over-year at an estimated 11.0% (11.1% in 2012), despite a less favorable product and market mix. Market share gains were achieved in Italy (+1.1 p.p. to 34.2%), Spain (+1.4 p.p. to 21.3%), France (+0.2 p.p. to 13.5%), Germany (+0.3 p.p. to 8.3%) and Poland (+1.1 p.p. to 11.7%). In the light vehicle category, Group share was 11.4% for the year (-0.1 p.p. over 2012), with gains in all major markets except the UK. In the medium category, share was 0.6 percentage points higher at 24.6%, with gains in nearly all markets. For heavy vehicles, share was in line with the prior year at 7.1%. The Group maintained its leadership position in Italy (35.5%) and posted a significant gain in Spain (+1.6 p.p. to 19.5%).
In LATAM, truck registrations were up 8.9% over the prior year to 225,800 units, with increases of 12.1% in Brazil and 16.6% in Argentina, offset by a significant decline in Venezuela (-24.9%).
Group share was 11.0%, a decline of 0.6 percentage points over 2012, despite a 1.5 percentage point increase in Argentina to 23.8%.
In Europe, dealer new vehicle inventories at December 31, 2013 were down 14% from year-end 2012 to a level representing coverage of approximately 2 months of expected sales activity (from 3 months at year-end 2012).
Trucks and Commercial Vehicles closed the year with a trading profit of €101 million, compared with €466 million for 2012. Negative market and product mix and tight price competition continued to affect margins primarily in Southern Europe. In LATAM, new product launch costs and unfavorable foreign exchange rate impacts more than offset positive market trends and pricing.
For the fourth quarter, revenues were in line with the prior year at €2.7 billion (up 3.3% on a constant currency basis). Trading profit was €94 million, compared with €167 million for the same period in 2012.
Powertrain reported 2013 revenues of €3,331 million, an increase of 13.6% over the prior year (up 14.6% on a constant currency basis) with higher volumes recorded to both Group companies and external customers. For 2013, sales to external customers accounted for 34% of total revenues, in line with 2012.
During the year, Powertrain sold a total of 544,812 engines, an increase of 14.3% year-over-year. By major customer, 30% of engines were supplied to Trucks and Commercial Vehicles, 30% to Agricultural and Construction Equipment, and the remaining 40% to external customers. Additionally, Powertrain delivered 62,133 transmissions (-3.2% over 2012) and 156,772 axles (+1.2% over 2012).
Powertrain closed the year with a trading profit of €158 million, an increase of 12%, representing a trading margin of 4.7%, compared to €141 million (trading margin of 4.8%) for 2012. Higher revenues and better capacity utilization drove the improvement, which was partially offset by an increase in R&D costs aimed at maintaining technological leadership.
For the fourth quarter, Powertrain posted revenues of €985 million, a 19.1% increase over the same period in 2012 (up 20.2% on a constant currency basis). Trading profit was €71 million, compared with €64 million for the fourth quarter of 2012.
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