For the third quarter of 2009, CNH reports a $25 million third-quarter loss but positive operating Profit of $72 million.
Notwithstanding a slowdown in its Agricultural Equipment Net Sales (23% year-over-year) and a dramatic reduction in its Construction Equipment Net Sales (56% year-over-year), CNH reported Operating Profit of $72 million in the third quarter (down from $339 million in the third quarter of 2008) on Net Sales of $2,960 million (32% lower than the third quarter of 2008).
CNH maintained its program of aggressive production controls to offset the effects of continuing weak market conditions. Accounts receivable reduction of $281 million and inventory reduction of $440 million were the primary drivers of improved cash flow which reduced Equipment Operations' Net Debt by $155 million.
Equipment Operations' inventories and receivables have been significantly reduced, which generated positive cash flow from operating activities. The company is on track to achieve its year-end objective of reducing personnel by 11 to 12%.
Agricultural Equipment's Net Sales declined by 23% in the quarter and 19% for the first nine months of the year compared with 2008. Despite the overall industry decline, there was relative strength in the highest horsepower tractor markets in North America and CNH's tractor market share for the quarter was up in North America. Market share for combines was up in Latin American and stable in Western European markets in the quarter. To reduce inventories, the company under-produced retail unit sales by 16% in the quarter and by 10% for the first nine months of the year.
In the third quarter, the company's brands launched various new products. Case IH Agriculture launched the Austoft 8000 series sugar cane harvester which delivers a 35% increase in chopper power and electronic ground drive with cruise control. It also prepared for its fourth quarter launch of updated Maxxum, Puma and Magnum tractors covering the entire 100 to 225 horsepower range.
Case Construction added the high performance 650L to its crawler dozer line. The 650L delivers more performance, a lower overall operating height and weight and productivity boosting maintenance features. It delivers 74 net horsepower through a Tier-3 turbocharged engine with electronic fuel injection.
New Holland Agriculture launched its new flagship T7000 series tractors (167 to 225 horsepower) with continuously variable Auto Command transmissions and new armrest control console in North America and Western Europe.
On October 8, CNH and Russia's Kamaz JSC, a global truck maker, announced plans to develop an industrial and commercial alliance to further strengthen CNH's position in Russia's agricultural and construction equipment markets. The two companies intend to establish an industrial joint venture to produce combines, tractors and agricultural implements, as well as some construction equipment, in Naberezhnye Chelny, Tatarstan. The JV will begin operation in 2010 and will produce machines from the CNH family of brands. Kamaz sales and service network reaches all regions of Russia and the CIS through 127 dealers and more than 100 service centers.
The company's outlook includes medium and long term global agricultural fundamentals remain strong, but worldwide industry retail unit sales continue to be impacted by current economic and credit conditions. Full year 2009 worldwide tractor industry retail unit sales are expected to be down 10 to 15% from the record levels of 2008, while combine industry retail unit sales could be down 20 to 25%.
For the fourth quarter of 2009, the company expects global agricultural equipment industry retail unit sales to continue to soften and be down 20 to 25%, with worldwide industry retail unit sales of Over-40 horsepower tractors to decline by 20 to 25% and industry retail unit sales of combines to be down 15 to 20%. It's expected the Under-40 horsepower tractor segment in North America to be down approximately 40%. CNH continues to expect pockets of strength in some of the highest horsepower tractor industry sales, tractors in China and the Asia Pacific region and for sugar cane harvesters in Brazil.
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