CNH Global N.V. last week announced financial results for the quarter ended March 31. For the quarter, net sales increased 17 percent to $3.8 billion as a result of favorable trading conditions for agricultural equipment in North America, Europe, Africa, Middle East and CIS and Asia Pacific markets. These results were driven by increased prices in global agricultural commodities, as well as higher construction equipment demand in the Americas and APAC regions. Equipment Operations posted an operating profit of $246 million as a result of higher revenues, increased industrial utilization and improved product pricing.
Net equipment sales for the quarter were $3.8 billion, a 17.3-percent increase from $3.2 billion in the first-quarter 2010. Net sales in the construction equipment segment were $726 million, an 18.8-percent increase from $611 million in the year-ago quarter.
Net income before restructuring and exceptional items for the quarter was $138 million as a result of improved top line and industrial operating performance, improved results from the group's non-consolidated entities, and a lower tax rate. This resulted in the group generating a significant increase in diluted earnings per share to $0.57 (before restructuring and exceptional items) compared to $0.16 per share in the comparable period of 2010.
First-quarter 2011 net sales in the construction equipment sector grew 19 percent as a result of significant market improvements in the Latin American and Asian markets, and from the improvement in conditions in the North American market largely as a result of aging fleet replacements. Operating loss for the quarter was reduced more than 50 percent to $(17) million as increased revenue and improved product pricing helped to offset the significant costs of new product launches in North America and production ramp-up costs in Europe, and the negative currency (Japanese Yen) effect on purchased whole goods in the excavator product range.
On March 31, CNH acquired full ownership of L&T Case Equipment Private Limited, an unconsolidated joint venture established in 1999 in the construction equipment sector and based in India. As a result of this transaction, CNH recorded an after-tax revaluation gain of $16 million, which has been reflected as an exceptional item in the quarter. The group has provisionally accounted for the transaction and expects to finalize it in the second quarter.
Demand in the agricultural and construction equipment markets are expected to remain firm for the balance of 2011 on the back of a positive environment in agricultural commodity prices and its influence on increased planting and farming income estimates; and a steadily improving environment in construction equipment. The company expects construction equipment demand to be up 25 percent for the year, with agricultural equipment demand to be flat to up 5 percent.
CNH is monitoring the medium-term effects from the earthquake in Japan on March 11, on both its business partners and component suppliers. While none of its business partners or Tier-1 suppliers have suffered irreparable damage, the company expects that component parts supply disruptions will necessitate periodic production curtailments in Q2 and Q3 primarily in the construction equipment segment. Further, the company anticipates that in certain product classes of whole goods (primarily excavators) availability will be constrained during the timeframe. At of the end of the first quarter, the group estimates that the economic impact could negatively affect full-year revenues between $300 to 500 million and operating profit between $40 to 60 million.
Despite this unexpected headwind, the CNH Group re-affirmed its previously released full-year revenue and earnings growth targets for 2011 of revenue growth of +10 percent at an operating margin range of 7.1 to 7.9 percent.
CNH Global N.V., Burr Ridge, Ill., is a world leader in the agricultural and construction equipment businesses. CNH includes the Case and New Holland brand families. CNH Global N.V. is a majority-owned subsidiary of Fiat Industrial S.p.A.
