CNH Global N.V., Lake Forest, Ill., last week reported second quarter 2007 net income of $228 million, up 55 percent compared to net income of $147 million in the second quarter of 2006. Results included restructuring charges, net of tax, of $19 million in the second quarter of 2007, compared with $7 million in the second quarter of 2006. Net income excluding restructuring charges, net of tax, was $247 million, up 60 percent compared to $154 million in the prior year. Second-quarter diluted earnings per share were $0.96, compared with $0.62 per share in 2006.
First half 2007 net income of $323 million was up 70 percent compared to net income of $190 million in the first half of 2006. First half diluted earnings per share were $1.36, compared with $0.81 per share in 2006.
“Our Equipment Operations gross margin rose 0.7 percentage points compared with the second quarter last year — our eighth consecutive quarter of year-over-year gross margin improvement,” said Harold Boyanovsky, CNH president and CEO. “Our industrial operating margin rose 1.5 percentage points to 10.8 percent, making it the best quarterly margin in CNH history. Our stronger performance reflects our revitalized brand, customer and quality focus and stronger worldwide agricultural and construction equipment industries. We are reaffirming our industrial operating margin target of between 7.6 and 8.4 percent for the full year.”
Net sales of equipment, comprising the company’s agricultural and construction equipment businesses, were $4.1 billion for the first half of 2007, compared to $3.5 billion for the same period in 2006. Net of currency variations, net sales increased 12 percent.
Construction equipment net sales for the second quarter increased 7 percent to $1.3 billion, compared to the prior year. Net sales were up 2 percent excluding currency variations.
Financial Services operations reported an 18-percent year-over-year increase in second quarter net income, to $58 million, reflecting the impact of higher receivables under management. Financial Services also recorded lower provisions for credit losses than in 2006, partially offset by increases in SG&A costs.
Net sales of equipment, comprising the company’s agricultural and construction equipment businesses were $7.3 billion for the first half of 2007, compared to $6.4 billion for the same period in 2006. Net of currency variations, net sales increased 9 percent.
In the first half of 2007, construction equipment net sales increased 9 percent to $2.4 billion, compared to the prior year. Net sales were up 4 percent excluding currency variations.
For the full year, CNH expects North American industry retail unit sales of both heavy and light construction equipment to be down compared with 2006. North American industry sales of both heavy and light construction equipment weakened in the second quarter, as housing starts and activity levels continued to decline.
For the year, the company expects both heavy and light construction equipment industry retail unit sales outside of North America to be up, more than offsetting the decline in North America. Industry sales of heavy and light equipment are expected to be up about 15 percent in Western Europe, and between 25 and 30 percent in Latin American and Rest-of -world markets. Construction activity remains robust, supported by solid GDP growth and stable used equipment prices.
In total, CNH now expects worldwide industry retail unit sales of both heavy and light construction equipment to be up about 10 percent.
Based on these agricultural and construction equipment market outlooks and the initiatives undertaken in the last two years designed to properly position the company’s four main brands, CNH anticipates that 2007 diluted earnings per share, before restructuring, net of tax, should be in the range of $2.30 to 2.45, compared with $1.53 for the full year 2006.
“We are raising our 2007 EPS estimate to $2.45 (was $2.25), primarily to reflect stronger than expected Q2 results and higher industry volumes,” said David Bleustein, UBS Investment Research analyst. “We are raising our 2008 EPS estimate to $3.25 (was $3.10) to reflect a higher base year. We maintain our price target of $47 per share and our Reduce 2 rating.”
CNH Global N.V. is a global provider of agricultural and construction equipment. businesses. The company is a majority-owned subsidiary of Fiat S.p.A.