CNH Industrial closed second quarter with revenues of $7.0 billion, operating profit of Industrial Activities of $401 million, and net income of $122 million.
Financial results under U.S. GAAP(*) (**)
- Second quarter revenues totaled $7.0 billion, down 10% compared to Q2 2014 on a constant currency basis (down 22% on a reported basis). Net sales of Industrial Activities were $6.6 billion, down 10% compared to Q2 2014 on a constant currency basis (down 23% on a reported basis).
- Operating profit of Industrial Activities for the quarter was $401 million ($678 million in Q2 2014), with operating margin at 6.0% (7.9% in Q2 2014).
- Costs for research and development and selling, general and administrative expenses were $851 million in Q2 2015, down $199 million or 19% compared to Q2 2014.
- Net income was $122 million, or $0.09 per share. Net income before restructuring and other exceptional items was $141 million, or $0.11 per share, down $241 million compared to Q2 2014.
- Net industrial debt was $3.0 billion at June 30, 2015 ($3.1 billion at March 31, 2015). Available liquidity totaled $7.8 billion ($7.2 billion at March 31, 2015).
- Full year guidance updated as follows: net sales of Industrial Activities in the range of $26-27 billion, with operating margin of Industrial Activities between 5.6% and 6.0% and net industrial debt at the end of 2015 between $2.0 billion and $2.2 billion.
(*) CNH Industrial reports quarterly and annual consolidated financial results under U.S. GAAP and IFRS. The following tables and discussion related to the financial results of the Company and its segments are prepared in accordance with U.S. GAAP. Financial results under IFRS are shown in specific tables at the end of this press release.
(**) Refer to the Non-GAAP Financial Information section of this press release for information regarding non-GAAP financial measures.
CNH Industrial N.V. (NYSE:CNHI / MI:CNHI) today announced consolidated revenues of $6,958 million for the second quarter of 2015, down 10.0% compared to Q2 2014 on a constant currency basis (21.9% on a reported basis). Net sales of Industrial Activities were $6,634 million in Q2 2015, down 10.0% compared to Q2 2014 on a constant currency basis (22.5% on a reported basis). Excluding the negative impact of currency translation, net sales increased for Commercial Vehicles (up 11.9%) confirming a positive trend in EMEA for trucks and buses. This increase was more than offset by the forecasted protracted decline in Agricultural Equipment, driven by lower industry volumes in the row crop sector and dealer inventory de-stocking actions, primarily in NAFTA, slightly offset by favorable net pricing in all regions. Furthermore, net sales decreased in Construction Equipment, due to negative industry volumes primarily in LATAM, and in Powertrain, due to lower sales to captive customers.
Operating profit of Industrial Activities was $401 million in Q2 2015, a $257 million decrease compared to Q2 2014 on a constant currency basis (down $277 million on a reported basis), with an operating margin for the second quarter of 6.0%, down 1.9 p.p. compared to Q2 2014. Operating profit declined in Agricultural Equipment, driven by negative volume and product mix in the row crop sector, primarily in NAFTA, and negative foreign exchange impacts, primarily resulting from the weakening of the euro and the Brazilian real. These negative factors were partially offset by positive net pricing, and cost control actions including purchasing efficiencies and structural cost reductions. Commercial Vehicles’ operating result improved due to favorable volume, product and market mix, and pricing, as well as manufacturing efficiencies and cost reductions in selling, general and administrative (“SG&A”) expenses. Construction Equipment’s operating profit improved as cost containment actions more than offset the negative impact from lower volume in LATAM, primarily in Brazil. Net of the negative impact of currency translation, Powertrain’s operating profit was substantially flat, as a result of lower volumes offset by favorable product mix and manufacturing efficiencies.
Restructuring expenses totaled $22 million for the quarter, $8 million lower than Q2 2014, and mainly relate to actions in Commercial Vehicles and Agricultural Equipment as part of the Company’s Efficiency Program launched in 2014.
Interest expense, net totaled $117 million for the quarter, a decrease of $41 million or 26% compared to Q2 2014, primarily due to a more favorable cost of funding and a lower average indebtedness in the quarter.
Other, net was a charge of $93 million for the quarter, an increase of $30 million compared to Q2 2014 mainly as a result of higher foreign exchange losses.
Income taxes totaled $126 million, representing an effective tax rate of 53.6% for the quarter (32.6% in Q2 2014, which had been impacted by certain discrete tax benefits as a result of the favorable resolution of tax audits). The Q2 2015 tax rate is negatively impacted by the inability to record deferred tax assets on losses in certain jurisdictions. The Company’s effective tax rate for the full year is expected now to be in the range of 48% to 52%. Nonetheless, the long-term effective tax rate target of between 34% to 36% range remains unchanged.
Equity in income of unconsolidated subsidiaries and affiliates totaled $13 million for the quarter ($31 million for Q2 2014). The decrease was mainly due to lower results of joint ventures in APAC.
Net income of Financial Services was $98 million for the quarter compared to $105 million for Q2 2014, mainly due to the negative impact of currency translation partially offset by a reduction in SG&A expenses.
Consolidated net income was $122 million for the quarter ($358 million for Q2 2014), or $0.09 per share ($0.26 for Q2 2014). Net income before restructuring and other exceptional items was $141 million for the quarter ($382 million in Q2 2014) or $0.11 per share ($0.28 for Q2 2014).
Net industrial debt was $3.0 billion at June 30, 2015 ($3.1 billion at March 31, 2015 and $2.7 billion at December 31, 2014). Net industrial cash flow generation of $0.5 billion in the second quarter 2015 was primarily attributable to a reduction in working capital as a result of inventory reduction actions in Agricultural Equipment and the increase in demand for Commercial Vehicles in EMEA. In addition, the change in net industrial debt in the second quarter includes $0.3 billion in dividends paid to shareholders in April 2015 and an unfavorable foreign exchange impact on euro denominated debt.
Available liquidity at June 30, 2015 was $7.8 billion, inclusive of $2.8 billion in undrawn committed facilities, $0.6 billion higher than March 31, 2015, mainly due to the new CNH Industrial Capital LLC $0.6 billion threeyear bond issuance and positive cash-flow from operating activities that more than offset bank debt reduction and dividend distribution.
