CNH Industrial, the parent company of Case and New Holland construction equipment, cited “lower industry demand and dealer inventory management” when reporting its net sales decreased 10% in the first quarter compared to the same period last year.
For the first three months of the year, construction segment revenues were down 11% to $758 million. The global industry volume for heavy construction equipment dropped 1% year-over-year in the first quarter, while light construction equipment was down 8%.
The Asia Pacific region was the only bright spot, with demand increasing by 3%. Demand decreased 14% in EMEA, 10% in South America, and 6% in North America. Despite the sales declines, the construction segment's gross profit margin increased across all regions for an aggregate improvement of 150 basis points.
Agriculture net sales dropped 14% to $3.37 billion, primarily due to lower industry volume across all regions and dealer inventory management, partially offset by favorable price realization.
In total, net sales of Industrial Activities were $4.13 billion in the quarter, down 14 percent compared to the corresponding quarter in 2023. Price realization continued to be favorable for agriculture and essentially flat for construction, CNH said in its earnings report.
“The CNH team navigated a declining market environment in the first quarter, as lower industry demand persisted especially in South America and Europe. Anticipating these headwinds, we are continuing to improve what we can control – production efficiency, disciplined commercial execution, judicious SG&A reductions, and thoughtful product and technology investments,” said CEO Scott Wine. “As always, the team is meeting challenges head-on and working diligently to deliver solutions for our customers. I would like to thank our employees and dealers for their unwavering support of the world’s farmers and builders.”
CNH Industrial
2024 Outlook
CNH forecast that 2024 global industry retail sales of ag and construction equipment would be lower compared to 2023.
While the company previously estimated that agriculture industry retail sales would be down between 10% and 15%, it now projects industry volumes down approximately 15%, the low end of the previous range.
Construction equipment industry retail sales estimates remain unchanged and are still expected to be down around 10% when compared to 2023.
Due to the expected sales decline, CNH announced a 5% reduction to its salaried workforce in November 2023 and cuts to its senior leadership team in January 2024. The company says the restructuring program is progressing “according to plan,” and it expects a run rate reduction of 10-15% on total labor and non-labor SG&A expenses.
Bank of America downgraded the ag and construction equipment manufacturer to Neutral from a previous investment rating of Buy on April 22, causing shares to slip the most since November. The rating change followed the “surprising appointment" of a new CEO, according to a Seeking Alpha report. The company announced that Gerrit Marx would replace Scott Wine, who is leaving to pursue other interests, effective July 1. As such, the company has rescheduled its May 21 Investor Day to allow Marx time to lead the company’s planning and objectives for the next phase of its development.
The new forecast is as follows:
- Agriculture segment net sales down between 11% and 15% year-over-year including currency translation effects (from down 8% to 12% previously)
- Agriculture segment adjusted EBIT margin between 13.5% and 14.5% (from between 14.0% and 15.0% previously)
- Construction segment net sales down between 7% and 11% year-over-year including currency translation effects (unchanged)
- Construction segment adjusted EBIT margin between 5.0% and 6.0% (unchanged)
- Free Cash Flow of Industrial Activities between $1.1 and $1.3 billion (from between $1.2 to $1.4 billion previously)
- Adjusted diluted EPS between $1.45 to $1.55 (from between $1.50 to $1.60 previously)
CNH Industrial
