• 31-JAN-2017

  • SOURCE: CNH Industrial

CNH Industrial closed full year 2016 with revenues of $24.9 billion, adjusted net income(3) of $482 million, net loss of $249 million, and net industrial debt of $1.6 billion

CNH Industrial Logo
Financial results presented under U.S. GAAP (1)
  • Operating profit(2)(3) of Industrial Activities was $1,291 million for 2016, with operating margin of 5.5%
  • Adjusted net income(2)(3) was $482 million for 2016, with adjusted diluted EPS(2)(3) of $0.35
  • Net industrial debt(2)(3) was $1.6 billion at December 31, 2016, $1.1 billion lower than September 30, 2016 and flat as compared with December 31, 2015
  • The Board of Directors is recommending a dividend of €0.11 per common share, or approximately €150 million (~$160 million)
  • CNH Industrial will take a restructuring charge of approximately $100 million in 2017 as part of its industrial Efficiency Program. The Company expects the program to generate incremental savings of approximately $60 million in 2017 and $80 million on an annualized basis
  • For 2017, CNH Industrial expects net sales of Industrial Activities between $23 billion and $24 billion and adjusted diluted EPS between $0.39 and $0.41. Net industrial debt expected between $1.4 billion and $1.6 billion
CNH Industrial N.V. (NYSE:CNHI / MI:CNHI) today announced consolidated revenues of $24,872 million for the full year 2016, down 4.0% compared to 2015. Net sales of Industrial Activities were $23,669 million for the year, down 4.1% compared to 2015. In the fourth quarter of 2016, consolidated revenues were $6,998 million, down 2.0% compared to the fourth quarter of 2015. Net sales of Industrial Activities were $6,682 million for the fourth quarter of 2016, down 2.7% compared to the fourth quarter of 2015. Reported net loss was $249 million for the full year 2016, including the previously announced non-tax deductible charge of $551 million following the finalization of the European Commission settlement, a charge of $60 million ($38 million after-tax) related to the repurchase of portions of Case New Holland Industrial Inc. 7.875% Notes due 2017, an exceptional charge of $34 million due to the re-measurement and impairment of certain assets of our Venezuelan subsidiary, as well as a one-time non-cash tax charge of $59 million related to the corporate reorganization of our Latin American operations, including changes to valuation allowances on deferred tax assets. Adjusted net income was $482 million for the full year, up 1.7% compared to 2015. Reported net income was $96 million in the fourth quarter of 2016, compared to $231 million in the fourth quarter of 2015, with adjusted net income of $197 million for the quarter, compared to $262 million in the fourth quarter of 2015.

Operating profit of Industrial Activities was $1,291 million for the full year 2016 ($1,432 million in 2015), with an operating margin of 5.5% (5.8% in 2015). In the fourth quarter of 2016, operating profit of Industrial Activities was $412 million, compared to $563 million for the fourth quarter of 2015, with an operating margin of 6.2% (8.2% for the fourth quarter of 2015). “While the Agricultural Equipment market remained at historically low demand levels in 2016, our margin performance was in line with our expectations and we made significant progress on further reducing channel inventory,” said Richard Tobin, Chief Executive Officer of CNH Industrial. “The Commercial Vehicles segment continues to improve in profitability and market share in the EMEA region. While the LATAM market was generally challenging for all segments, we are starting to see signs of recovery there, especially in the Agricultural Equipment segment with shipments up 30% in the fourth quarter of 2016 compared to the fourth quarter of 2015. In addition to solid operating execution, we were able to significantly over-achieve on our net industrial debt target for the year and to reduce our future interest costs through two capital markets transactions, both of which further our efforts to achieve an investment grade credit rating.”   

Full year 2016 income taxes amounted to $298 million ($360 million in 2015). Adjusted income taxes(1)(2)  for full year 2016 amounted to $265 million ($368 million in 2015). The adjusted effective tax rate (adjusted ETR)(1)(2) was 39%, an improvement of 7 p.p. from prior year adjusted ETR.

Net industrial debt was $1.6 billion at December 31, 2016, $1.1 billion lower than September 30, 2016 and in line with December 31, 2015, as the net industrial cash flow generated during the year offset the impact of the European Commission settlement payment, the $0.2 billion in dividends paid and negative foreign exchange translation impacts. Total debt of $25.3 billion at December 31, 2016, was down $1.0 billion compared with December 31, 2015. As of December 31, 2016, available liquidity(1)(2) was $8.7 billion, down $0.6 billion compared with December 31, 2015. 

Agricultural Equipment’s net sales decreased 8.2% for the full year 2016 compared to 2015 (down 7.2% on a constant currency basis), primarily as a result of unfavorable industry volume and product mix in the row crop sector in NAFTA, and in the small grain sector in EMEA. Net sales increased in LATAM, mainly due to improvement in the Brazilian market and the positive impact of currency translation, and were flat in APAC. In the fourth quarter of 2016, Agricultural Equipment’s net sales decreased 5.1% compared to the fourth quarter of 2015 (down 5.8% on a constant currency basis). 

Full year 2016 operating profit was $818 million, a $134 million decrease compared to 2015, mainly due to lower volume and unfavorable product mix in NAFTA and EMEA, partially offset by favorable price realization and cost containment actions, including lower material cost. Operating margin was 8.1% (down 0.5 p.p. compared to 2015). In the fourth quarter of 2016, operating profit was $272 million ($348 million in the fourth quarter of 2015). Operating margin decreased 2.1 p.p. to 9.6%. 

Construction Equipment’s net sales decreased 9.4% for the full year 2016 compared to 2015 (down 8.6% on a constant currency basis), due to unfavorable industry volume and product mix in NAFTA and LATAM and negative price realization. In the fourth quarter of 2016, net sales decreased 5.1% compared to the fourth quarter of 2015 (down 5.9% on a constant currency basis). 

Full year 2016 operating profit was $2 million compared to $90 million in 2015. The decrease was due to lower volume and unfavorable product mix, particularly in the heavy product range in NAFTA and in LATAM, and negative price realization, partially offset by cost containment actions. In the fourth quarter of 2016, operating loss was $30 million compared to $18 million operating profit in the fourth quarter of 2015, as a result of lower industry volume, a significant reduction in manufacturing volume to reduce inventories to anticipate new product launches, negative price realization and an unfavorable foreign exchange impact on product cost, partially offset by cost containment actions.

Commercial Vehicles’ net sales were flat for the full year 2016 compared to 2015 (up 1.8% on a constant currency basis), primarily as result of increased truck volume and favorable pricing in EMEA, offset by lower volume in the specialty vehicles business and the negative impact of currency translation. In LATAM, net sales decreased due to lower industry volume in Brazil and Argentina. In the fourth quarter of 2016, net sales decreased 1.7% compared to the fourth quarter of 2015 (flat on a constant currency basis) due to lower volume in buses and specialty vehicles in EMEA, and the negative impact of currency translation. Net sales were flat in LATAM, while increasing in APAC, mainly for truck.

Full year 2016 operating profit was $333 million, a $50 million increase compared to 2015, despite a significant reduction in contract deliveries in our defence business and the scaling down of our business activities in Venezuela. The increase on a full year basis was due to positive price realization, lower material cost, improved product quality and manufacturing efficiencies in the EMEA region, partially offset by the impact of difficult market demand conditions in LATAM. Full year operating margin was 3.5% (up 0.5 p.p. compared to 2015). In the fourth quarter of 2016, operating profit was $131 million ($155 million in the fourth quarter of 2015), with an operating margin of 4.7% (down 0.7 p.p. compared to the fourth quarter of 2015). The decrease was primarily due to unfavorable volume and mix in Argentina as a result of transitional Euro III emissions deliveries last year, and negative currency transaction impacts in certain markets, partially offset by manufacturing efficiencies and material cost reductions primarily in EMEA. 

Powertrain’s net sales increased 4.1% for the full year 2016 compared to 2015 (up 4.9% on a constant currency basis), primarily due to higher volume to third parties. Sales to external customers accounted for 47% of total net sales (46% in 2015). Net sales increased 4.4% for the fourth quarter of 2016 compared to the fourth quarter of 2015 (up 5.8% on a constant currency basis) due to positive volume and mix.

Full year 2016 operating profit was $232 million, a 25% increase compared to 2015 mainly due to higher volume and manufacturing and purchasing efficiencies. Operating margin increased 1.1 p.p. to 6.3%. In the fourth quarter of 2016, operating profit was $61 million, flat compared to the fourth quarter of 2015. Operating margin was 6.4% (down 0.4 p.p. compared to the fourth quarter of 2015 largely as a result of a less favorable mix of intercompany shipments).
 
Financial Services’ revenues decreased 2.1% for the full year 2016 compared to 2015 (down 1.0% on a constant currency basis), primarily due to a lower average portfolio and the negative impact of currency translation. In the fourth quarter of 2016, net revenues totaled $397 million, a 5.3% increase compared to the fourth quarter of 2015 (up 2.8% on a constant currency basis), due to better interest yields and favorable currency translation. 

In 2016, retail loan originations (including unconsolidated joint ventures) were $9.0 billion, down $0.4 billion compared to 2015, primarily due to the decline in Agricultural Equipment sales. The managed portfolio (including unconsolidated joint ventures) of $24.8 billion as of December 31, 2016 (of which retail was 64% and wholesale 36%) was up $0.1 billion compared to December 31, 2015. Excluding the impact of currency translation, the managed portfolio was down $0.1 billion compared to 2015.

Full year 2016 net income was $334 million, a decrease of $34 million compared to 2015 primarily due to reduced interest spreads, the lower average portfolio and currency translation. In the fourth quarter of 2016, net income was $83 million, a decrease of $8 million compared to the fourth quarter of 2015.

Dividends 
The Board of Directors of CNH Industrial N.V. intends to recommend to the Company’s shareholders at the Annual General Meeting a dividend of €0.11 per common share, totaling approximately €150 million (~$160 million). Subject to the AGM’s approval (expected on April 14, 2017), the ex-dividend date would be set at April 24, 2017. 

2017 Outlook
In an effort to drive incremental structural improvements to its cost base, the Company intends to undertake several restructuring actions during 2017 as part of its Efficiency Program. The estimated 2017 expense of approximately $100 million will result in incremental savings of approximately $60 million in 2017, included in the adjusted diluted EPS guidance below, and $80 million on an annualized basis.

CNH Industrial is setting its 2017 guidance(1) as follows:
  • Net sales of Industrial Activities between $23 billion and $24 billion;
  • Adjusted diluted EPS(2) between $0.39 and $0.41
  • Net industrial debt at the end of 2017 between $1.4 billion and $1.6 billion.
London, January 31, 2017 ​