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UPDATE 2-CNH Industrial sees light ahead for Iveco truck unit
October 31, 2013 / 2:23 PM / 4 years ago

UPDATE 2-CNH Industrial sees light ahead for Iveco truck unit

MILAN, Oct 31 (Reuters) - Tractor and trucks maker CNH Industrial reported an 11 percent fall in its third-quarter trading profit on Thursday, hit by a stronger euro, but said its long-suffering Iveco truck business might now be on the turn.

The newly formed sister company of Italian car maker Fiat stuck to its full-year targets on Thursday as a strong performance from high-margin agricultural machinery is expected to offset weakness in trucks and construction equipment.

It also said it sees “material improvement” in Iveco’s profitability by the year-end as the European economy recovers.

“We expect to have a material improvement in Iveco’s trading profit in the fourth quarter from the previous quarter,” Chief Executive Richard Tobin told analysts on a conference call.

Europe’s heavy truck makers are emerging from an extended slump in demand due to the economic malaise in the euro zone, with a growing body of evidence that the need to replace ageing fleets is at last prompting truck operators to invest.

CNH Industrial, which competes with Caterpillar Inc and Deere & Co, said it made a trading profit (earnings before interest, tax and one-time items) in the third quarter of 508 million euros ($691 million), down from 570 million in the same period last year, while revenue fell 1.5 percent to 6.22 billion euros.

Net profit fell to 248 million euros from 291 million a year ago.

Though predominantly a maker of farm and construction machinery about one third of its revenue comes from trucks, with Iveco a drag on earnings in recent quarters after it cut prices to maintain market share in Europe.

Trading profits at Iveco fell 95 percent to 15 million euros in the third quarter, although net revenue rose nearly 2 percent to 2.09 billion euros because of what the company described as a “modest recovery” in European demand.

Trading profit at its Agricultural and Construction Equipment division was up 5.8 percent at 470 million euros despite further losses in the construction business.

CNH Industrial also reaffirmed its financial forecasts for 2013 of a 3-4 percent revenue increase, a trading margin of between 7.5 and 8.3 percent and net industrial debt of between 1.4 billion and 1.6 billion euros. Trading margin in the third quarter was down 0.8 percentage points at 8.2 percent.

The results are the first to be announced since CNH Industrial was created at the end of last month from the merger of Fiat Industrial and its U.S. unit CNH and the group will begin reporting its results in dollars instead of euros from the first quarter of next year now its primary listing is in New York.

The company will also present new financial targets when it releases its first-quarter results next year, Tobin said.

The shares were down 3 percent at $11.78 by 1804 GMT. Earlier its shares in Milan, where the company has a secondary listing, closed down 3.3 percent at 8.71 euros ($11.84).

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