CNH Industrial

(26.94% stake, 39.96% of voting rights on issued capital. FCA also holds a 1.17% stake, 1.74% of voting rights)

The key consolidated figures of CNH Industrial in the year 2015 (drawn up in accordance with IFRS) are as follows::

Net revenues

Net revenues of the CNH Industrial Group in 2015 amount to $26,378 million, a decrease of 20% compared to 2014 (-8.9% on a constant currency basis). Net revenues of Industrial Activities are $24,903 million, a decrease of 20.7% (-9.4% on a constant currency basis).

The decrease in the net revenues of Agricultural Equipment (-16.9% on a constant currency basis) is primarily driven by declining volumes in all regions; the decrease in Construction Equipment (-18.3% on a constant currency basis) is mainly attributable to decreased industry volumes particularly in LATAM and APAC, while the decrease in Powertrain (-5.1% on a constant currency basis) is due mainly to lower captive demand. Excluding the impact of currency translation, Commercial Vehicles show an increase in net revenues of approximately 4.9%, owing primarily to higher volumes in EMEA, while in LATAM revenues are down due to declining volume in the Brazilian market.

Net revenues of Financial Services increased by3.1% on a constant currency basis due to a higher average outstanding portfolio and increased sales of equipment formerly on operating leases, partially offset by a reduction in interest yield.

Trading profit

Trading profit in 2015 is $1,543 million, a decrease of $856 million (-35.7%) compared to 2014. The trading margin is 5.8% compared to 7.3% in 2014.

Trading profit of Industrial Activities totals $1,036 million, down $831 million from 2014, with a trading margin of 4.2%, a decrease of 1.7 percentage points compared to the prior year. 

Agricultural Equipment’s decrease in trading profit is principally due to declining industry volumes in NAFTA and LATAM and negative foreign exchange translation, partially offset by positive net pricing, lower raw material cost and structural cost reductions.

Construction Equipment closed 2015 with a decrease in trading profit compared to 2014 due to the negative impact of lower volumes in LATAM and APAC and higher R&D costs, only partially offset by structural cost containment actions and net price realization.

Commercial Vehicles’ trading profit improved due to increased volumes mainly in EMEA, positive pricing, and a reduction in selling, general and administrative expenses. In LATAM positive pricing and manufacturing cost containment actions offset a large portion of the lower volumes in Brazil.

The reduction in trading profit of Financial Services in 2015 compared to the prior year is due to the negative impact of currency translation, partially offset by lower provisions for credit loss and selling, general and administrative costs.

Operating profit

In 2015 restructuring costs are $79 million and relate to actions in the efficiency program launched in 2014 in the Agricultural Equipment and Commercial Vehicles segments.

Restructuring costs in 2014 totaled $192 million and referred mainly to the same program.

Profit for the year

Net financial expenses in 2015 are $805 million including a pre-tax charge of $150 million related to the remeasurement of the net monetary assets of the Venezuelan operations denominated in Venezuelan bolivars following the adoption of the SIMADI exchange rate, and a pre-tax charge of $40 million due to the devaluation of the net monetary assets of the Argentinian subsidiaries. In 2014 net financial expenses came to $776 million and included a pre-tax charge of $71 million related to the remeasurement of Venezuelan monetary assets denominated in bolivars.

Excluding these pre-tax charges in both years, net financial expenses decreased by $132 million in 2015 compared to 2014 due to reduced average indebtedness and lower funding costs.

In 2015 income taxes total $425 million ($566 million in 2014). Excluding the impact of the pre-tax charge relating to the re-measurement of the net monetary assets of the Venezuelan operations, for which no corresponding tax benefit has been booked, and the impact of the inability to record deferred tax assets on losses in certain jurisdictions, primarily in Brazil, the effective tax rate for 2015 would have been 40%. 

Net debt

Net industrial debt at December 31, 2015 is $1,570 million, a decrease of $1,304 million compared to $2,874 million at December 31, 2014. Cash flows from operations before changes in working capital are $1,537 million, while working capital generated another $504 million, mainly due to a decrease in inventories. Net capital expenditures are equal to $1,113 million and the currency translation differences produced a positive effect on net industrial debt of $550 million.

Significant events in 2015 and subsequent events

In April 2015 CNH Industrial announced that in line with the ongoing global Efficiency Program launched in 2014, certain changes in the geographical location of the operations of its Iveco commercial vehicles will involve the manufacturing facilities in Madrid, Valladolid and Piacenza.

In September 2015 the Dow Jones Sustainability Indices (DJSI), World and Europe, again confirmed CNH Industrial as Industry Leader for 2015.

The DJSI has also named CNH Industrial as leader in the Capital Goods Industry Group. The 2015 assessment resulted in a score of 91/100 for CNH Industrial compared to an average of 52/100 for the participating companies in the Machinery and Electrical Equipment industry. All the companies chosen for consideration in the indices were judged in terms of economic, environmental and social performance by RobecoSAM, specialists exclusively focused on sustainable investment.

In January 2016 CNH Industrial, after authorization by the annual general meeting of the shareholders on April 15, 2015, announced a buyback program to repurchase up to $300 million in common shares, subject to market and business conditions. The buyback program will be financed from the CNH Industrial Group’s liquidity.

In February 2016 the Venezuelan government devalued its currency and changed its official and most preferential exchange rate to the CENCOEX rate, which will continue to be used for purchases of certain essential goods, from 6.3 Bs.F. to 10 Bs.F. per U.S. dollar. Venezuela reduced its three-tier system of exchange rates by eliminating the SICAD rate which last sold U.S. dollars for 13.5 Bs.F. The SIMADI exchange rate, initially fixed at 198.7 Bs.F, was allowed to float freely beginning at a rate of 202.9 Bs.F to the U.S. dollar. CNH Industrial is currently in the process of assessing the potential impact, if any, that this change to the Venezuelan exchange rate mechanism may have on its business, financial position, cash flows and/or results of operations in future periods. 

On March 24, 2016 CNH Industrial communicated that, subsequent to the publication of the 2015 consolidated financial statements on March 4, 2016, developments arose relating to an investigation since 2011 conducted by the European Commission on the subsidiary Iveco S.p.A. and on some of its competitors in relation to certain alleged anticompetitive practices in the European Union.

Based on this CNH Industrial has decided to record a charge related to the matters under investigation of approximately $500 million (€450 million) in the first quarter of 2016. This charge will be taken into account as an exceptional item and is expected not to be tax deductible.