Burr Ridge, Ill.-based CNH Global NV last week reported that robust 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 percent for the second quarter of 2008 compared to the second quarter of 2007. The company’s construction equipment also grew sales in the quarter driven by growth in Latin America and rest-of-world markets, which more than offset declining market conditions in North America and Western Europe, according to Harold Boyanovsky, CNH president and CEO.
“Given the continued robust market growth in Latin America, we announced the reopening of our Sorocaba, Brazil, production facility that will increase our capacity in combine harvesters and construction equipment,” Boyanovsky said. “Pricing and operational actions implemented in earlier quarters, part of a continuous program to improve margins and maximize profits on our growing volumes, are showing positive results in offsetting rising material cost pressures and production capacity constraints. Based on our first-half performance, we are tightening our full-year 2008 guidance to $3.40 to $3.60 diluted EPS, before restructuring, after tax.”
Worldwide construction equipment industry retail unit sales remained at near-record levels with continuing increases in Latin American and rest-of-world markets despite Western Europe’s decline from its record level and a continued weak market in North America. Industry sales of heavy construction equipment were robust in most markets, leading to a more favorable product sales mix.
Construction equipment operating margin declined to 6.5 percent primarily as positive price recovery was not sufficient to offset volume declines and unfavorable manufacturing costs associated with an imbalance in the distribution of demand combined with higher SG&A as a percent of sales.
The company’s outlook for the global construction industry is for growth in heavy equipment industry sales to offset a decline in light equipment industry sales. CNH expects continuing strength in Latin American and rest-of-world markets driven by growing economies and infrastructure spending. It also expects construction demand in Western Europe to decline from recent record levels as GDP growth and construction activity levels weaken, but that demand will remain at high levels compared with recent history. Driven largely by weakness in the housing market, the North American construction outlook remains soft and CNH expects North American construction demand to continue its decline for the remainder of the year from already low levels.
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 percent 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 percent as the company continues the improvement trend started in the second quarter.
CNH Global N.V. is a global equipment supplier made up of the Case and New Holland brand families.