CNH Industrial N.V. announces consolidated revenues of $6,773 million for the first quarter of 2018, up 17% compared to the first quarter of 2017. Net sales of Industrial Activities were $6,300 million in the first quarter of 2018, up 19% compared to the first quarter of 2017. Net income was $202 million for the first quarter of 2018.
Adjusted net income was $204 million for the first quarter of 2018 compared to $55 million in the first quarter of 2017, with an adjusted diluted EPS of $0.14 ($0.04 in the first quarter of 2017).
Adjusted EBITDA of Industrial Activities was up 40% to $547 million for the first quarter of 2018 compared to $391 million for the first quarter of 2017, with an adjusted EBITDA margin of 8.7%, up 1.3 percentage points (p.p.) compared to the first quarter of 2017.
Income taxes were $63 million in the first quarter of 2018 ($51 million in the first quarter of 2017). Adjusted income taxes for the first quarter of 2018 were $64 million ($54 million in the first quarter of 2017). The adjusted effective tax rate (adjusted ETR) of 26% (59% in the first quarter of 2017) improved as a result of a favorable geographic mix of earnings, and the lower U.S. tax rate. For the full year 2018, the company updates its expectation of an adjusted ETR of approximately 30%.
Net industrial debt of $1.9 billion at March 31, 2018 increased by $1.0 billion from December 31, 2017, as a result of normal seasonality in working capital in the first quarter. Total debt of $24.7 billion at March 31, 2018, was down $1.2 billion compared to December 31, 2017 primarily as a result of the repayment at maturity of the remaining outstanding CNH Industrial Finance Europe S.A. 6.25% Notes of approximately $1 billion. At March 31, 2018, available liquidity was $7.6 billion, down $1.7 billion compared to December 31, 2017. During the first quarter of 2018, the company repurchased 6.8 million of its common shares for a total amount of $90 million under the buy-back program authorized by the Annual General Meeting of Shareholders (AGM) held on April 14, 2017. The program has been reauthorized and increased to $700 million from $300 million. Furthermore, in April 2018, the company repaid at maturity the outstanding $600 million of the CNH Industrial Capital LLC 3.625% Notes from available cash.
On April 16, 2018, the company announced that, as a consequence of a favorable judgment issued by the United States Supreme Court in February 2018, the company determined to modify the healthcare benefits (the “Benefits”) provided to certain of the company’s U.S. retirees to make them consistent with the Benefits provided to current eligible CNH Industrial retirees who had been represented by the UAW Union. These Benefits modifications are estimated to result in a reduction of the plan liability by approximately $500 million to $550 million in the second quarter of 2018.
Segment Results
Agricultural Equipment’s net sales increased 15% in the first quarter of 2018 compared to the first quarter of 2017 (up 11% on a constant currency basis). The increase was the result of higher sales volumes and positive net price realization. Industry demand was overall flat, with strong industry volume in APAC and lower demand in LATAM.
Adjusted EBIT was $186 million in the first quarter of 2018 ($115 million in the first quarter of 2017). Adjusted EBIT margin increased 2.1 p.p. to 7.2% compared to the first quarter of 2017. The increase was due to favorable volume, better mix, and higher production levels, with NAFTA row crop production matching retail demand, as a result of an achieved balanced inventory of used equipment. Price realization, net of a negative foreign exchange transaction impact, represented 2.5% of revenues, and was partially offset by raw material cost increases and higher overhead costs. The company continues to invest in its product development program for precision farming and compliance with Stage V emissions requirements.
Construction Equipment’s net sales increased 36% in the first quarter of 2018 compared to the first quarter of 2017 (up 32% on a constant currency basis), as a result of a solid rebound in worldwide demand and market share gains across most regions.
Adjusted EBIT achieved breakeven in the first quarter of 2018 from a negative adjusted EBIT of $31 million in the first quarter of 2017. Results were favorably impacted by higher sales volume due to improved end-user demand, as well as the related 30% increase in production. Pricing conditions remain favorable, more than offsetting unfavorable foreign exchange impact and raw material cost increases. The order book is up approximately 20% relative to the prior year period.
Commercial Vehicles’ net sales increased 17% in the first quarter of 2018 compared to the first quarter of 2017 (up 5% on a constant currency basis), primarily as a result of higher industry volumes in the light commercial vehicle market in Europe. Net sales increased in APAC and were flat in LATAM.
Adjusted EBIT was $49 million for the first quarter of 2018 (up from $17 million in the first quarter of 2017). Adjusted EBIT margin increased 1.2 p.p. to 2.0% compared to the first quarter of 2017. The increase was mainly due to favorable end-user demand in light commercial vehicles, improved pricing and manufacturing efficiencies, partially offset by increased spending in new product development initiatives.
Powertrain’s net sales increased 19% in the first quarter of 2018 compared to the first quarter of 2017 (up 5% on a constant currency basis), as a result of higher sales volume in engine applications. Sales to external customers accounted for 48% of total net sales (45% in the first quarter of 2017).
Adjusted EBIT was $95 million for the first quarter of 2018, a $21 million increase compared to the first quarter of 2017, with an adjusted EBIT margin of 8.0%, up 0.6 p.p. compared to the first quarter of 2017, as a result of the higher volumes and manufacturing efficiencies.
Financial Services’ revenues totaled $502 million in the first quarter of 2018, a decrease of 2% compared to the first quarter of 2017.
In the first quarter of 2018, retail loan originations (including unconsolidated joint ventures) were $2.2 billion, up $0.3 billion compared to the first quarter of 2017. The managed portfolio (including unconsolidated joint ventures) was $26.5 billion as of March 31, 2018 (of which retail was 62% and wholesale 38%), up $1.8 billion compared to March 31, 2017. Excluding the impact of currency translation, the managed portfolio increased $0.5 billion compared to the same period in 2017.
Net income was $103 million in the first quarter of 2018, an increase of $16 million compared to the first quarter of 2017, primarily due to a better performance in EMEA and LATAM, and due to the lower U.S. tax rate.
2018 Outlook
As a result of the stronger than anticipated results in the first quarter of 2018 and positive developments in end-user demand, CNH Industrial is increasing its net sales and adjusted diluted EPS guidance for the full year 2018 to the upper-end of its range as follows:
- Net sales of Industrial Activities of approximately $28 billion;
- Adjusted diluted EPS(2) of $0.65 to $0.67;
- Net industrial debt at the end of 2018 unchanged at between $0.8 billion and $1.0 billion.
