2013 Third Quarter Results
CNH INDUSTRIAL THIRD QUARTER NET REVENUES OF €6.2 BILLION, NET PROFIT OF €248 MILLION
CNH INDUSTRIAL N.V., THE COMPANY FORMED BY THE MERGER BETWEEN FIAT INDUSTRIAL S.P.A. AND CNH GLOBAL N.V.
. Third quarter revenues totaled €6.2 billion, down 1.5% over Q3 2012. On a constant currency basis revenues increased 5.4%, as growth for the agricultural equipment, trucks and commercial vehicles and powertrain businesses was partially offset by more challenging trading conditions in the construction equipment business.
· Trading profit for the quarter was €508 million, with trading margin at 8.2% (Q3 2012: €570 million, 9.0% margin).
· Net profit of €248 million, or €0.169 per share, down €43 million against Q3 2012.
· Net industrial debt increased €228 million during the quarter to €2,502 million at September 30, 2013, with positive operating performance offset by a seasonal increase in working capital and sustained capital expenditures primarily related to new product initiatives. Available liquidity totaled €4.9 billion.
· Full year guidance confirmed.
The results presented in this press release are 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 consolidated 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, starting from 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) – (October 31, 2013) CNH Industrial N.V. (NYSE:CNHI / MI:CNHI) today announced Group revenues of €6,217 million for the third quarter 2013, a decrease of 1.5% over the third quarter of 2012 (+5.4% on a constant currency basis). Revenues from Agricultural and Construction Equipment were down 4.9% to €3,889 million. On a constant currency basis, revenues increased by €119 million due to sustained demand in the Agricultural Equipment business, partially offset by lower global demand for Construction Equipment products. Trucks and Commercial Vehicles revenues increased 1.9% to €2,093 million from low demand levels in Q3 2012. Powertrain revenues increased 18% to €762 million, driven by higher volumes from both internal and external customers.
Group trading profit was €508 million for the third quarter, down €62 million from Q3 2012 (a decrease of 10.9%). Trading margin for the third quarter decreased 0.8 p.p. to 8.2%. On a constant currency basis, trading profit decreased 4.9%, mainly due to Euro VI transitional costs and a less favorable product mix and pricing environment in the commercial vehicles segment, lower global demand for Construction Equipment and unfavorable exchange rate impacts mainly due to Latin American currencies across the businesses. These adverse factors were partially offset by positive net price realization in Agricultural Equipment and higher revenues and better capacity utilization in Powertrain.
Operating profit was €498 million in Q3 2013, compared with €561 million for Q3 2012.
Net financial expense totaled €114 million for the third quarter, a slight increase over €112 million for Q3 2012, mainly due to the increase in average net industrial debt.
Income taxes totaled €154 million, representing an effective tax rate of 38% for the quarter, in line with the prior year period and Group expectations for the full year.
Group net profit was €248 million for the quarter (€291 million for Q3 2012), or €0.169 per share (€0.209 for Q3 2012).
Net industrial debt of €2,502 million at September 30, 2013 was €228 million higher than at June 30, 2013, with positive operating performance being more than offset by a seasonal increase in working capital and sustained capital expenditure levels, primarily related to new product initiatives.
Available liquidity of €4,903 million inclusive of €1,584 million in undrawn committed facilities, decreased €383 million during the third quarter and was impacted by the repayment of a $1 billion bond (€759 million equivalent) , partially offset by new financing related to the portfolio growth in Financial Services.
First Nine Months
Group revenues for the first nine months totaled €18,844 million, an increase of 0.4% (+4.3% on a constant currency basis) over the prior year. Sales increases for Agricultural Equipment and Powertrain compensated for the lower revenue in Construction Equipment and Trucks and Commercial Vehicles.
Group trading profit for the first nine months totaled €1,549 million, a decrease of €79 million compared to the same period of 2012 (a decrease of 4.9%). Trading margin in the first nine months decreased 0.5 p.p. to 8.2%. On a constant currency basis, trading profit decreased by 0.7%, primarily due to lower profitability from negative volume/mix, pricing pressures and negative exchange rate impacts affecting both Trucks and Commercial Vehicles and Construction Equipment. These adverse factors were offset by improved results for the Agricultural Equipment business driven primarily by positive pricing.
For the nine months through September, operating profit was €1,480 million, compared with €1,488 million for the corresponding period in 2012.
Net financial expense totaled €344 million for the period, an increase of €10 million over the same period in 2012, mainly due to the increase in average net industrial debt.
Net profit for the first nine months was €747 million (€744 million for the same period in 2012), or €0.504 per share (€0.530 for the same period in 2012).
Net industrial debt of €2,502 million at September 30, 2013, compared with €1,642 million at December, 31, 2012, with positive operating performance offset by a seasonal increase in working capital, sustained capital expenditures (mostly due to new product related initiatives), dividend payments and currency effects.
Compared with December 31, 2012, available liquidity decreased by €1,303 million and was impacted by the repayment of a $1 billion bond in September 2013, partially offset by new financing associated with Financial Services portfolio growth, including a CNH Capital LLC $600 million bond (€444 million equivalent) issued in April.
Agricultural and Construction Equipment
Agricultural and Construction Equipment had revenues of €3.9 billion for the quarter, down 4.9% (+2.9% on a constant currency basis) over Q3 2012, as positive performance for Agricultural Equipment offset challenging conditions for Construction Equipment. The geographic distribution of net revenues for the period was 45.3% NAFTA, 25.6% EMEA, 17.1% LATAM and 12.0% in APAC.
Agricultural Equipment third quarter net revenues decreased 2.3% (+5% on a constant currency basis) with all geographies increasing revenues at constant currency except the APAC region, largely as a result of comparable period tender activity and difficult trading conditions in Australia. Worldwide Agricultural Equipment production was 6% above retail sales in the quarter, in anticipation of strong seasonal retail demand in the fourth quarter. The Group expects to under produce retail in the agricultural segment for the balance of the year.
Construction Equipment third quarter net revenues decreased 17.1% (-9% on a constant currency basis) as market conditions remained challenging in most regions. Worldwide Construction Equipment production was 13% above retail sales in the quarter, and the Company has taken action in the fourth quarter to adjust production closer to current retail demand.
Agricultural and Construction Equipment trading profit increased to €470 million for the quarter, up €26 million from the prior year period, with a trading margin of 12.1% (10.9% in Q3 2012). Agricultural Equipment trading profit increased €32 million over Q3 2012 to €410 million and trading margin was 1.3 p.p. higher at 13.1%, with positive net pricing partially offset by increased costs associated with Tier 4B compliance. Construction Equipment reported a trading loss of €30 million (€15 million loss for Q3 2012) due mostly to lower volumes. Financial Services posted third quarter trading profit of €90 million, a €9 million increase over Q3 2012, primarily reflecting the increase in the average portfolio and lower credit loss provisions.
First nine months
Agricultural and Construction Equipment reported revenues of €12.1 billion for the first nine months of 2013, a 0.9% increase over the same period in 2012 (+5.3% on a constant currency basis) as net revenues of Agricultural Equipment increased 5.4% while decreasing 17.4% for Construction Equipment.
Trading profit totaled €1,485 million, up €195 million from the first nine months of 2012, with a trading margin of 12.3% (10.7% in the first nine months of 2012). Agricultural Equipment trading profit increased €200 million over the corresponding period in 2012 to €1,228 million and trading margin was 1.5 p.p. higher at 12.8% mainly due to positive net price realization, as well as improved volume/mix, which more than compensated for increased R&D expenditures and other operational costs. Construction Equipment reported a trading loss of €42 million, compared with trading profit of €10 million for the first nine months of 2012, primarily as a result of lower volumes and unfavorable product mix. Financial Services posted a trading profit of €299 million, a €47 million increase over the first nine months of 2012.
Trucks and Commercial Vehicles
Trucks and Commercial Vehicles had revenues of €2.1 billion in the quarter, an increase of 1.9% over Q3 2012 (+8.2% on a constant currency basis), with a modest recovery in demand in Europe and a significant increase in LATAM being largely offset by negative market and product mix, decreasing volumes for parts and services business particularly in the depressed Southern European markets, and lower volume in specialty vehicles due to delivery timing.
During the quarter Trucks and Commercial Vehicles delivered a total of 31,436 vehicles (including buses and specialty vehicles), representing an 8.6% increase over Q3 2012. Volumes were down 1.6% in light vehicles, but up 45.3% in medium vehicles and 12.9% in heavy vehicles. By region, deliveries were up 30.3% in LATAM, 2.7% in EMEA and 3.6% in APAC.
The European truck market (GVW ≥3.5 tons) was up 0.9% over Q3 2012 to approximately 151,600 units, reversing the downward market trend since the end of 2011, with significant growth in the UK (+9.8%), Poland (+8.2%) and Spain (+2.8%). By category, demand was down 0.9% for light vehicles and 2.0% for medium vehicles. In the heavy vehicles category, registrations were up 4.7% over Q3 2012, as purchase activity for the more economical Euro V vehicles began to pick up prior to the mandatory introduction of Euro VI vehicles in January 2014.
The Group’s third quarter share of the European truck market (GVW ≥3.5 tons) was estimated at 10.7%, down 0.7 p.p. compared with Q3 2012.
In LATAM, new truck registrations (GVW ≥3.5 tons) were up 27.7% over Q3 2012 to 60,830 units. The year-over-year improvement was primarily driven by the 55.5% increase in heavy vehicles (GVW >31 tons), which was attributable primarily to government incentives in Brazil. Registrations of light vehicles (GVW 3.5-7.9 tons) were up 11.5% and medium vehicles (GVW 8-31 tons) increased by 25.1%.
The Group’s share of the LATAM market (GVW ≥3.5 tons) was down 0.1 p.p. over Q3 2012 to 11.2%.
In EMEA, dealer new vehicle inventories decreased 17% over year-end 2012 to a level representing coverage of approximately 1.4 months of expected sales activity.
Trucks and Commercial Vehicles closed the third quarter with a trading profit of €15 million, compared with €110 million for Q3 2012. Negative market and product mix and tight price competition continued to affect margins primarily in Southern Europe and, due to ongoing economic uncertainty, bad debt provisions have been increased. In addition, new product launch costs and unfavorable foreign exchange rate impacts more than offset positive market trend and pricing in LATAM.
First nine months
Trucks and Commercial Vehicles posted revenues of €6.1 billion for the first nine months of 2013, a 2.6% decrease (+0.7% on a constant currency basis) over the same period a year ago.
During the first nine months of 2013 Trucks and Commercial Vehicles delivered a total of 92,833 vehicles (including buses and special vehicles), representing a 1.2% increase over the same period in 2012. There was a 3.5% decrease in deliveries of light vehicles, while volumes were up 13.0% in medium and 2.4% in heavy vehicles. Deliveries were down 3.0% in EMEA and 9.3% in APAC, but up 21.8% in LATAM.
The European truck market was down 6.1% over the same period in 2012 to just over 466,200 units, with contractions in all major markets except the UK, which was in line with the prior year. By vehicle type, light vehicles were down 5.6%, medium vehicles were down 8.9% and heavy vehicles were down 6.4%.
The Group’s share of the European truck market was estimated at 11.1%, in line with the first nine months of 2012.
In LATAM, vehicle registrations were up 11.9% year-over-year to 169,480 units. While light vehicles registrations declined 6.1%, demand was up 10.6% in medium and 40.0% in heavy vehicles.
The Group’s share of the LATAM market was down one percentage point to 10.7%.
Trucks and Commercial Vehicles closed the first nine months of 2013 with a trading profit of €7 million, compared with €299 million for the corresponding period in 2012. The decrease was primarily attributable to negative volume/mix, pricing pressures, operational costs related to transition to Euro VI and unfavorable exchange rate effects.
Powertrain reported third quarter revenues of €762 million, an increase of 18% (+19.8% on a constant currency basis) over Q3 2012 primarily attributable to higher volumes. Sales to external customers accounted for 33% of total revenues, in line with the same period in 2012.
During the quarter Powertrain sold a total of 129,174 engines, an increase of 20.4% year-over-year. By major customer, 31% of engines were supplied to Trucks and Commercial Vehicles, 30% to Agricultural and Construction Equipment, and the remaining 39% to external customers. Additionally, Powertrain delivered 13,024 transmissions and 34,400 axles, an increase of 3.5% and 12.2% respectively over the same period in 2012.
Powertrain closed the third quarter with a trading profit of €35 million, up €10 million from the same period in 2012, with a trading margin of 4.6% (3.9% for the same period in 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.
First nine months
Powertrain reported revenues of €2,346 million for the first nine months of 2013, representing an 11.4% (+12.3% on a constant currency basis) year-over-year increase, mainly driven by higher volumes. Sales to external customers accounted for 32% of total revenues, in line with the first nine months of 2012.
In the first nine months Powertrain delivered a total of 387,900 engines, up 12% compared to the same period in 2012, to Trucks and Commercial Vehicles (31%) and Agricultural and Construction Equipment (30%), with the remaining 39% of sales to external customers. In addition, Powertrain delivered 46,511 transmissions and 114,010 axles, up 1.2% and 3.4% respectively from the same period 2012.
Powertrain’s trading profit totaled €87 million for the first nine months, up €10 million compared to the corresponding period in 2012, with a trading margin of 3.7%, in line with the same period in 2012.
New product announcements during the quarter
Agricultural and Construction Equipment
At the Farm Progress Show in Decatur, Illinois, Case IH launched 18 new tractor models in North America which meet the upcoming Tier 4B off-road emissions standards. Among these models are the highest horsepower tractors available on the market today with the Steiger Quadtrac 620 and new models of the Magnum and Maxxum tractors. Case IH is the first and only agricultural equipment manufacturer to use Selective Catalytic Reduction (SCR) technology alone to meet strict Tier 4B emissions standards, while offering customers best overall fuel efficiency.
New Holland Agriculture also launched several new models at the Farm Progress Show presenting the new Tier 4B T7, T8 and T9 high horsepower tractors, featuring the ECOBlue™ HI-eSCR technology, where NOx emissions are reduced by 95% compared to Tier 1 levels. In Europe, New Holland Agriculture received a Sitevi Gold Medal for the Opti-Grape™ technology, which delivers best-in-class cleaning performance on the Braud grape harvesters, as well as two Agritechnica Silver Medals for the Opti-Speed™ straw walkers and the cornrower.
In North America, Case Construction Equipment introduced two new midi crawler excavators at the American Public Works Association (APWA) exposition in August. The CX75C SR and CX80C were launched as new C Series excavators. These machines also offer class exclusive Tier 4B emissions compliance, using Compact Exhaust Gas Recirculation (CEGR) and Diesel Oxidation Catalyst (DOC) technologies. The CX75C SR received one of Rental Magazine’s “Top Products of 2013” awards. In Europe, Case Construction Equipment introduced a new wheel loader dedicated to waste & recycling applications.
In July, CNH Industrial inaugurated its manufacturing site in Foshan, China (central Guangdong province), which will initially assemble Case IH sugar cane harvesters.
In August, the new facility in Urumqi (Xinjiang Uyghur Autonomous Region northwest China) was inaugurated and it will assemble Case IH cotton pickers.
In early September, expansion of the Harbin, China site progressed with official inauguration of the new R&D center, which has been established to develop advanced agricultural machinery products tailored to the specific requirements in China. CNH Industrial’s Product Development Center in Harbin is the largest R&D facility operated by a global agricultural machinery manufacturer in Northeast China.
Trucks and Commercial Vehicles
In EMEA, in September the Segment participated at two major international motorhome trade shows, Caravan Salon in Düsseldorf and Véhicules de Loisirs in Paris-Le Bourget, where the Segment exhibited its range of the Daily and Eurocargo chassis bases that were conducive to conversion. The brand is a leader in the high end of the motorhome segment, with premium specifications and medium-to-heavy gross vehicle weight.
In September, Naveco (a Group joint venture) presented a new mid-size cab Yuejin “Chaoyue”, further expanding the model range which last year was named “Truck of the Year 2013” in China. Naveco also received the “2013 China Logistics Technology & Equipment Innovation Enterprise” and “2013 China Logistics Technical Equipment Industry Technology Innovation Products” awards for the Power Daily at the 2013 National Conference of Modern Logistics Development, due to the efficiency, affordability, safety and innovation of its products.
At “Comtrans 2013” in Moscow, the Segment exhibited its entire product lineup complete with the CNG versions of the Daily and Eurocargo. The Segment is a leader in the natural gas vehicle segment in Europe with its full range of CNG vehicles.
In Turkey, activities were heavily focused on promotion of the new Stralis Hi-Way, including the vehicle’s premiere at the Antalya Auto Show.
In LATAM, the Segment launched the Stralis Hi-Way heavy duty truck in Brazil. Produced at the Group’s plant in Sete Lagoas, the vehicle is available with three engine variants (440 hp, 480 hp and 560 hp) and three different configurations.
For on-road applications, developments during the quarter included the production launch of the Euro VI version of the NEF engine (N45 and N67 engines) for vehicles and buses produced by the Trucks and Commercial Vehicles Segment. The Chongqing plant in China began production of the Euro IV version of the F1C engine for the Power Daily produced by Naveco to be sold in APAC markets, as well as the Euro VI version of the Cursor 9 for buses produced by Trucks and Commercial Vehicles and the Dutch customer VDL Bus & Coach.
Significant events during the third quarter and subsequent to September 30, 2013
The deeds of merger for the mergers of Fiat Industrial S.p.A. and CNH Global N.V. with and into CNH Industrial N.V. were executed on September 27 and 28, 2013, respectively, and the integration of these companies was completed on September 29, 2013. At closing, CNH Industrial issued 1,348,867,772 common shares allotted to Fiat Industrial and CNH Global shareholders on the basis of the established exchange ratios. CNH Industrial also issued special voting shares (non-tradable) allotted to eligible Fiat Industrial and CNH Global shareholders who elected to also receive special voting shares in connection with the closing of the merger. On the basis of the requests received, CNH Industrial issued a total of 474,474,276 special voting shares. On September 30th, CNH Industrial common shares began trading on the New York Stock Exchange and the Mercato Telematico Azionario managed by Borsa Italiana S.p.A.
Also in September, CNH Industrial was confirmed Sector Leader in the Dow Jones Sustainability Indices (DJSI) World, Europe and World Enlarged. In its 2013 assessment, RobecoSAM, the specialists in sustainable investment, assigned a score of 88/100 compared with an average of 49/100 for the universe of Industrial Engineering companies evaluated. Inclusion in the prestigious DJSI family of indices is limited to companies judged best-in-class in terms of their economic, environmental and social performance. The Group’s position as Sector Leader reflects the significant results achieved in a number of areas that led to the highest score in the environmental and social categories.
On October 9th, CNH Capital LLC, a wholly-owned subsidiary of CNH Industrial N.V., completed a private offering of $500 million in aggregate principal amount of 3.250% notes due 2017. The notes were issued at par.
On the back of the Group’s performance to date and our expectations of recovering trading conditions across all segments and a continuation of strength in the agricultural equipment market, CNH Industrial is confirming its 2013 guidance as follows:
- Revenues up between 3% and 4%;
- Trading margin between 7.5% and 8.3%; and
- Net industrial debt between €1.4 billion and €1.6 billion.
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