CNH’s First Quarter Results

April 24, 2009 04:56 AM

In the first quarter of 2009, CNH's financial results were impacted by negative global economic conditions. CNH's North American sales of higher horsepower agricultural tractors and combines remained strong while the global construction equipment market continued to deteriorate.

Case IH Agriculture expanded its Magnum tractor range in North America, and introduced specialty tractors for narrow and vineyard applications.

New Holland Agriculture launched the 167 to 225 hp T7000 Auto Command range in Europe. It features the new in-house manufactured CVT transmission to optimize engine speeds and operating costs. New Holland Latin America introduced the T4030 75 HP standard tractor.

Case Construction introduced seven new models of its B Series excavators with increased fuel efficiency and lower noise levels.

New Holland Construction focused on the non-residential construction area, integrating its current product offering with configurations specific to infrastructure and demolition, as well as waste management applications.

In agricultural equipment, North American industry retail unit sales of large four-wheel drive tractors, combines, self-propelled sprayers and row crop planters grew in the first quarter, while sales of two-wheel drive tractors declined. Overall, CNH's agricultural equipment net sales declined 12% for the quarter compared with the first quarter of 2008.

Construction equipment net sales declined 59% in the first quarter. Worldwide construction equipment industry retail unit sales declined 57%, with industry retail sales of light construction equipment down approximately 61% and industry retail unit sales of heavy construction equipment down 50%.

CNH's gross profit decreased 39% in the quarter compared with the first quarter of 2008. Agricultural equipment's gross margin declined 1.8 percentage points compared with the first quarter of 2008, while construction equipment's gross margin declined 13.1 percentage points, for a net 3.2 percentage point decline in equipment operations gross margin relative to the comparable period in the prior year.

CNH expects equipment operations net sales for full year 2009 to be down 15 to 25% from 2008 as some first-half strength in North American high horsepower tractors and combines is offset by declines in all other agricultural equipment markets and further weakness in construction equipment sales.

CNH also plans to invest approximately $250 million during the next 12 months to reduce costs and improve operating efficiency.

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