CNH Posts Strong Financial Results

July 23, 2008 07:00 PM
An Farm Equipment Special

[Excerpted from CNH’s quarterly report on sales and financial results to its investors.]

CNH (Case IH/New Holland) has reported second quarter and first half financial performance to its investors—and it’s a good report, with robust agricultural industry sales and market share gains driving net sales of equipment to $5.3 billion, up 29% for the first six months of the fiscal year. Second quarter net income was up 52% when compared to the sane quarter in 2007.

According to their latest investor update, strong worldwide agricultural equipment industry retail unit sales growth in the second quarter and first half of this year combined with improved market share drove net sales of Agricultural Equipment up 38% for the quarter and first half of 2008. Industry sales of high horsepower tractors and combines, particularly in North America, increased more than the overall market, contributing to a more robust product mix of agricultural equipment sales.

Sales growth in the agricultural equipment business combined with favorable product sales mix were the primary drivers of CNH's diluted earnings per share growth of 52% for the second quarter of 2008 compared to the second quarter of 2007. Continued strong agriculture equipment industry growth and new product introductions, coupled with an emphasis on quality and disciplined supply chain management, lay the groundwork for solid future top line and earnings growth.

\Among second qQuarter 2008 brand activities, Case IH launched, in North America, the Farmall 65C & 75C, 64 and 76-horsepower Tier 3 compliant compact utility tractors for a wide variety of applications from livestock operations to municipalities. Its Puma 165-210 models, in the 135 to 180 horsepower range, can now be ordered autoguidance-ready with Case IH Advanced Farming Systems (AFS) for precision-farming applications.

Additionally, New Holland Agricultural Equipment launched the 523-horsepower CR9080 Twin Rotor Combine, in North America, a product that has industry-leading horsepower and maximizes productivity with the largest threshing capacity, cleaning area and cab on the market. It also launched the TV6070 Bidirectional™ tractor, which offers high visibility and features a new 6.7L engine with an efficient eight-range transmission.

CNH Market Outlook

Their statement says (CNH) believes the global agricultural industry outlook remains excellent. High cash grain commodity prices and low levels of commodity stocks provide strong support for continued growth for higher horsepower agricultural tractors and combines throughout the world. U.S. Net Farm Cash Income is expected to be at record levels, notwithstanding weakness in milk and meat prices. CNH expects the Western European tractor market to remain strong while the combine market will grow significantly. In Eastern Europe and the CIS, we expect the markets to grow, spurred by high cash grain commodity prices and the need to update equipment. We expect Latin American markets to show continued strong growth, supported by increase in sugar cane for use in ethanol production and cash grain commodity prices.

Taking advantage of strong global agricultural demand and construction strength in Latin American and Rest-of-World markets, CNH expects revenues for the full year 2008 to be up approximately 25% compared to 2007. CNH expects to fully offset recent increases in input costs with previously announced pricing actions and will continue to closely monitor future developments in raw material costs. CNH expects full year Operating Margins to approximate 9% as CNH continues the improvement trend started in the second quarter. CNH is tightening its expected full year Diluted EPS, before restructuring, after taxes of $3.40 to $3.60.

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