CNH Global last week announced net sales for the full-year 2009 declined 26 percent to $12.8 billion as the industry faced a global slowdown. In the face of this decline, the company implemented tight cost controls that delivered an operating profit of $373 million from Equipment Operations for the full year, a decline of 75 percent from the same period in 2008. The volume decline combined with the drive to reduce inventories were the primary factors in the decrease in Operating Profit from Equipment Operations. Net loss attributable to CNH, before restructuring, after tax, came to ($0.48) per share compared to net income of $3.59 per share for the full-year 2008, and $0.20 for the fourth quarter before restructuring, after tax, compared with $0.49 for the same period a year earlier, on a fully diluted basis.
CNH drove down costs in 2009, including an 18-percent reduction in SG&A expenses for Equipment Operations. The company reduced its overall work force by 13 percent and cut other operating costs. CNH continued to invest in products, although R&D expenditures were reduced by 6 percent as the company was able to leverage engine technology from Fiat’s FPT Powertrain Technologies and advanced design technology to cut development time and costs.
Equipment Operations generated $1.1 billion in cash from operating activities over the year. CNH exceeded its working capital reduction target for the full year, delivering $1.2 billion in cash flows through strict management of working capital, centered around a $1.4 billion reduction of inventory.
“In the face of the global economic slowdown, we set a clear target focusing on cash flow,” said Harold Boyanovsky, CNH president and CEO. “We put in place clear action plans, and today’s results clearly demonstrate disciplined execution of those plans. As we begin 2010, we will continue our focus on working capital management and tight cost controls to ensure we can take full advantage of the economic recovery, when it comes, to rebuild our profit margin and retain our ability to generate cash.”
As credit markets improved, CNH Capital completed 15 financing transactions in the fourth quarter totaling $4.5 billion, which generated $1.1 billion of incremental cash.
Construction Equipment’s net sales declined 16 percent in the quarter, and 53 percent for the full year compared with 2008. For the full year, weakness continued in the construction equipment industry, which was down 38 percent worldwide in 2009 with the light equipment industry down 45 percent and the heavy industry down 30 percent. CNH market share was flat in North America and declined in all other regions with the exception of Latin America, where it increased. The company continued to cut inventories, under-producing retail sales by 51 percent for the full year. Construction Equipment continued to focus on parts and service operations supporting dealers and customers through the economic slowdown.
CNH’s outlook calls for construction equipment markets globally to increase approximately 5 to 10 percent during 2010.
“In 2010 we will continue our focus on tight cash management and cost control,” Boyanovsky said. “We expect to generate cash from improved operating results and our ongoing focus on working capital management. Given the lack of visibility of macro conditions, we will continue to exercise discipline in areas over which we have control.”
CNH Global N.V. includes the Case and New Holland brand families.
