CNH Industrial
26.92% stake, 39.94% of voting rights on issued capital.
FCA also holds a 1.17% stake, 1.74% of voting rights).
Key consolidated figures of CNH Industrial for the year 2016 (drawn up in accordance with US GAAP) are as follows:
| Year | Change | ||
|---|---|---|---|
| $ million | 2016 | 2015 | |
| Revenues | 24,872 | 25,912 | (1,040) |
| Operating profit (loss) (1) | 1,439 | 1,635 | (196) |
| Adjusted net income (2) | 482 | 474 | 8 |
| Net (loss) income | (249) | 248 | (497) |
| Net industrial debt (3) | 1,561 | 1,578 | (17) |
Revenues
Revenues for the year 2016 of the CNH industrial Group were $24,872 million, down 4% compared to 2015. Net sales of Industrial Activities were $23.669 million, down 4% compared to 2015.
In particular, the decrease in net sales of Agricultural Equipment (-7.2% on a constant currency basis), primarily as a result of unfavorable industry volume and product mix in the row crop sector in NAFTA.
Also Construction Equipment ’snet sales decreased (-8.6% on a constant currency basis) due to unfavorable industry and product mix in NAFTA and LATAM and negative prices realization.
Commercial Vehicles’ net sales were flat (up 1.8% on a constant currency basis) primarily as a result of increased truck volume and favorable pricing in EMEA, offset by lower volume in buses and specialty vehicles business and the negative impact of currency translation.
On a constant currency basis, Powertrain’s net sales increased by 4.9% compared to 2015 due to higher volumes to third parties.
Financial Services were down 1.0% on a constant currency basis) due to a lower average portfolio and the negative impact of currency translation.
| Year | Change | |||
|---|---|---|---|---|
| $ million | 2016 | 2015 | amount | % |
| Agricultural Equipment | 10,120 | 11,025 | (905) | -8.2 |
| Construction Equipment | 2,304 | 2,542 | (238) | -9.4 |
| Commercial Vehicles | 9,553 | 9,542 | 11 | 0.1 |
| Powertrain | 3,707 | 3,560 | 147 | 4.1 |
| Eliminations and other | (2,015) | (1,992) | (23) | n.s. |
| Total Industrial Activities | 23,669 | 24,677 | (1,008) | -4.1 |
| Financial Services | 1,570 | 1,603 | (33) | -2.1 |
| Eliminations and Other | (367) | (368) | 1 | n.s. |
| Revenues | 24,872 | 25,912 | (1,040) | -4.0 |
Operating profit
Operating profit in 2016 was $1,439 million, a $196 million decrease compared to 2015 ($1,635 million).
Operating profit of Industrial Activities in 2016 was $1.291 million ($1,432 million in 2015), with an operating margin of 5.5% (5.8% in 2015).
The decrease in operating profit of Agricultural Equipmentwas primarily due to lower volume and unfavorable product mix in NAFTA and EMEA, partially offset by favorable price realization and cost containment actions, including lower material cost.
Commercial Vehicles’improvement was due to a positive price realization, lower material cost, improved product quality and manufacturing efficiencies in the EMEA region, partially offset by the impact of difficult market demand conditions in LATAM.
The decrease in the operating profit of Construction Equipment was due to lower volume and unfavorable product mix particularly in the heavy product range in NAFTA and in LATAM, and negative price realization, partially offset by cost containment actions.
Operating profit of Powertrain increased compared to 2015 primarily due to higher volume and manufacturing and purchasing efficiencies.
| Year | Change | ||
|---|---|---|---|
| $ million | 2016 | 2015 | |
| Agricultural Equipment | 818 | 952 | (134) |
| Construction Equipment | 2 | 90 | (88) |
| Commercial Vehicles | 333 | 283 | 50 |
| Powertrain | 232 | 186 | 46 |
| Elimination and other | (94) | (79) | (15) |
| Total Industrial Activities | 1,291 | 1,432 | (141) |
| Financial Services | 478 | 515 | (37) |
| Elimination and Other | (330) | (312) | (18) |
| Operating profit | 1,439 | 1,635 | (196) |
Adjusted net income
In 2016 an exceptional non-tax deductible charge was recorded of $551 million following the final settlement reached with the European Commission on the truck competition investigation, as well as a charge of $60 million related to the repurchase of a portion of the Case New Holland Industrial Inc. 7.875% Notes due 2017.
Net debt
Net industrial debt at December 31, 2016 was $1,561 million compared to $1,578 million at December 31, 2015. Industrial cash flow was a positive $1,045 million (a positive $758 million at December 31, 2015), considering working capital positive change of $330 million, the add back European Commission settlement for $551 million and the add back of repurchase of 2017 notes (excluded from the calculation of industrial cash flow), partially offset by investments for $501 million. Net debt reflects the payment of dividends and the purchase of treasury stock for approximately $221 million and currency translation differences of approximately $807 million.
| $ million | 12/31/2016 | 12/31/2015 (1) | Change |
|---|---|---|---|
| Financial Debt (2) | (25,276) | (26,301) | 1,025 |
| Derivatives hedging debt | 2 | 27 | (25) |
| Cash and cash equivalents | 5,017 | 5,384 | (367) |
| Restricted cash | 837 | 927 | (90) |
| Net debt/(cash) | (19,420) | (19,963) | 543 |
| Industrial Activities | (1,561) | (1,578) | 17 |
| Financial Activities | (17,859) | (18,385) | 526 |
Reconciliation with the IFRS data presented in the interim consolidated financial statements – shortened
| Year | ||
|---|---|---|
| $ million | 2016 | 2015 |
| Net (loss) income in accordance with U.S. GAAP | (249) | 248 |
| Development costs | (126) | (28) |
| Goodwill and other intangible assets | 8 | 8 |
| Defined benefit plans | 63 | 47 |
| Restructuring provisions | 1 | 5 |
| Other adjustments | (23) | 19 |
| Tax effect of adjustments | 48 | 1 |
| Deferred tax assets and tax contingencies recognition | (93) | (66) |
| Total adjustments | (122) | (14) |
| (Loss) profit in accordance with EU-IFRS | (371) | 234 |
| - of which attributable to owners of the parent | (373) | 236 |
Significant events in the fourth quarter of 2016 and subsequent events
On October 21, 2016 CNH Industrial announced that its wholly owned subsidiary, CNH Industrial Capital LLC, has completed its previously announced offering of $400 million in aggregate principal amount of 3.875% notes due 2021, issued at an issue price of 99.441%.
The net proceeds of this offering were approximately $394 million after payment of offering and other related expenses and will be used for working capital and other general corporate purposes, including among other things, the purchase of receivables or other assets in the ordinary course of business. The net proceeds may also be applied to repay CNH Industrial Capital LLC’s indebtedness as it becomes due.
The notes, which are senior unsecured obligations of CNH Industrial Capital LLC, will pay interest semi-annually on April 15 and October 15 of each year, beginning on April 15, 2017, and are guaranteed by CNH Industrial Capital America LLC and New Holland Credit Company LLC, each a wholly owned subsidiary of CNH Industrial Capital LLC. The notes will mature on October 15, 2021.
On December 16, 2016, Iveco, a brand of CNH Industrial and SAIC jointly announced today that they will restructure their Joint Ventures in China based on mutual understanding and trust in order to address the rapid evolution of China’s commercial vehicle market. Naveco, a 50:50 joint venture between Iveco and SAIC, will be entirely focused on the Iveco brand. The Yuejin brand business will be separated from Naveco.
On January 31, 2016, CNH Industrial completed its acquisition of the agricultural grass and soil business of Kongskilde Industries, previously part of the Danish Group Dansk Landbrugs Grovvareselskab.
Effective February 1, 2017 CNH Industrial will take over DLG A.m.b.A ’s business unit that develops, manufactures and sells solutions for agricultural applications for tillage, seeding and hay & forage under various brands, including Kongskilde, Överum, Howard and JF. As a result, New Holland Agriculture, one of the Company’s global agricultural machinery brands, will gain a significant extension to its product portfolio offering, while the Kongskilde brand, sales organizations, dealers and importers will continue to be developed and serviced.
2017 Outlook
In an effort to drive incremental structural improvements to its cost base, CNH Industrial intends to undertake several restructuring actions during 2017 as part of its Efficiency Program. The estimated 2017 expense of approximately $100 million will result in increment al savings of approximately $60 million in 2017, included in the adjusted diluted EPS guidance below, and $80 million on an annualized basis.
CNH Industrial is setting its 2017 guidance as follows:
- net sales of industrial activities between $23 billion and $24 billion;
- adjusted diluted EPS (between $0.39 and $0.41);
- net industrial debt at the end of 2017 between $1.4 billion and $1.6 billion.
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