CNH, parent company of ag equipment makers Case IH and New Holland, announced financial results for the third quarter ended September 30, 2010. For the quarter, Net Sales increased 19.6% (19.8% on a constant currency basis) to $3.5 billion due to solid performances delivered in the Americas and Rest of World regions augmented by a stabilization of trading conditions in Europe. Equipment Operations posted an Operating Profit of $239 million as a result of higher volumes, reduced industrial costs, and favorable product mix.
Net Sales were 78% agricultural equipment and 22% construction equipment for the quarter, as improving construction equipment unit demand continued to bring the Group's revenue distribution back to historical norms. The geographical distribution of revenue for the period was 44% North America, 19% Western Europe, 19% Latin America, and 18% Rest of World.
Equipment Operations generated $1.2 billion in cash flow from operating activities over the first three quarters of the year. Year-to-date capital expenditures totaled $153 million, a 11% increase from the comparable period, primarily in preparation for new product launches and engine emissions compliance upgrade; full year capital expenditures are expected to be in the $300 million range. CNH's Equipment Operations ended the period with a net cash position of $1.8 billion, an increase of $1.9 billion compared to the end of the third quarter in 2009. The 33% effective tax rate for the third quarter 2010 is within the Group’s long term expectations of 32% to 36%, as a result of tax incentives and tax return to provision filing differences, which largely offset the impact of not recording a tax benefit on losses in Europe for which conditions for their recognition are not currently satisfied.
Net Income before restructuring and exceptional items for the period of $102 million ($83 million inclusive of exceptional items) resulted in the Group generating a third quarter EPS of $0.43 ($0.35 inclusive of exceptional items) compared to a loss of $0.09 in the comparable prior year period.
2010 Market Outlook
CNH anticipates that global agricultural equipment markets will be up 0-5% for FY 2010. The CNH outlook for the global construction equipment markets is for an increase of 40 % to 45% in 2010.
2010 CNH Outlook
In view of the Group's performance through the first three quarters and current forecasts for trading activity in the remainder of the year, CNH anticipates that it will achieve the following financial targets: Net Sales in excess of $14.3 billion, Operating Profit of $900 million and net industrial cash of $1.3 billion.
Agricultural Equipment Industry and Market
Worldwide agricultural industry retail unit sales decreased 1% compared to the third quarter of 2009. Global tractor sales fell 1% while global combine sales grew 6% for the quarter.
North American markets rose 2%, with tractor sales up 2% and combine sales up 7% on continued strong demand from the large cash crop segments. Sustained commodity prices and the continuation of government support programs drove demand in Latin America where tractor sales rose 21% and combine sales were up 16%. The decline in equipment demand moderated in Western European markets which were down 5% for the quarter, with tractor sales falling 4% and combine sales down 13%. Rest of World markets were down 6%, with a 6% drop in tractor sales and a 7% rise in combine sales.
CNH Agricultural Equipment Third Quarter Results
Net Sales in the agricultural equipment segment increased 12.8% for the quarter (13.4% on a constant currency basis) on the back of growth in demand in the Americas that more than offset the difficult, but stabilizing, trading conditions in Europe and Rest of World markets. Operating Margin increased to 8.5% from 6.5% from the comparable period in 2009. This improved profit performance was largely the result of improved industrial economics, product mix, and favorable geographic distribution of revenues.
Company and dealer inventories ended the period largely in line with estimated market demand and historical norms for the period. CNH production for the period was slightly below the pace of retail sales due to seasonal plant shutdowns, inventory balancing, and in preparation for new product launches.
CNH continued to invest in its agricultural equipment product portfolio and industrial capacity during the third quarter. The Company continued to significantly invest in the launch of Tier 4/Stage IIIA product introductions with dealer and customer training programs completed during the period for the first products in the line-up, 4-wheel drive tractors. Investments in the Group's industrial footprint for both whole goods manufacturing and components supply continued in conjunction with the product plan announced in April 2010.
Post a comment
Report Abusive Comment