CNH Industrial

(26.89% stake, 41.68% of voting rights on issued capital)

Key consolidated figures of CNH Industrial for the year 2019 are as follows:

Revenues

Revenues for 2019 were $28,024 million, a decrease of 5.8% (down 0.9% on a constant currency basis) compared to 2018, primarily due to a decrease of 6.3% (down 1.4% on a constant currency basis) compared to the prior year in net revenues of Industrial Activities. 

Net revenues for Agriculture were $10,958 million in 2019, a 7.0% decrease (down 2.8% on a constant currency basis) compared to 2018. The decrease was primarily driven by lower industry volumes in North America and rest of world markets, coupled with actions to reduce dealer inventories in the second half of the year, partially offset by positive price realization performance across all geographies and sustained aftermarket activity.

For 2019, worldwide industry unit sales for tractors decreased 7% compared to 2018, while worldwide industry sales for combines were down 4% compared to 2018. In North America, industry volumes in the over 140 hp tractor market sector were down 3% and combines were down 7%. Industry volumes for under 140 hp tractors were up 2%. European markets were up 5% for tractors and down 16% for combines. In South America, tractor industry volumes decreased 13% and combine industry volumes decreased 5%. Rest of world markets decreased 10% for tractors and increased 2% for combines. 

Net revenues for Construction were $2,768 million in 2019, down 8.4% compared to 2018 (down 6.3% on a constant currency basis), as result of lower net sales in North America and rest of world markets due to weaker market conditions and actions to reduce dealer inventory levels in the second half of the year, partially offset by positive price realization.

In 2019, construction equipment’s worldwide compact equipment industry sales were up 4% compared to 2018, while worldwide general equipment industry sales were down 1% compared to 2018 and worldwide road building and site equipment industry sales were down 9%. 

Commercial and Specialty Vehicles' net revenues were $10,440 million in 2019, down 4.5% compared to 2018 (up 1.8% on a constant currency basis), driven by increased deliveries in bus and specialty vehicles, sustained aftermarket activity and positive price realization, more than offset by reduced wholesale volumes in M&H trucks in both Europe, where CNH Industrial is transitioning to a new commercial policy and refreshed product offering, and South America, primarily due to low industry volume in Argentina. 

Powertrain net revenues were $4,114 million in 2019, down 9.7% compared to 2018 (down 3.5% on a constant currency basis), due to lower sales volume. Sales to external customers accounted for 51% of total net revenues (50% in 2018). 

Financial Services reported net revenues of $1,996 million in 2019, flat compared to 2018 (up 3.7% on a constant currency basis) and primarily due to higher average portfolio, offset by the negative impact from foreign currency translation.

Adjusted EBIT

Adjusted EBIT of Industrial Activities was down 8.0% to $1,376 million in 2019, compared to $1,496 million in 2018, representing an Adjusted EBIT margin of 5.3%, down 10 basis points (“bps”) compared to 2018, mainly due to unfavorable volume and mix as well as raw material headwinds, which more than offset positive price realization and cost management actions. 

Adjusted EBIT of Agriculture was $900 million in 2019, a $198 million decrease compared to $1,098 million in 2018. Positive price realization, disciplined cost management, industrial efficiencies and a reduction in short-term incentive compensation expense were more than offset by lower wholesale volume and market and product mix, including negative industrial absorption primarily from the lower production levels (mainly in the second half of the year), as well as higher product costs as a result of increased raw material costs and tariffs. Adjusted EBIT margin decreased 80 bps to 8.2%. 

Adjusted EBIT of Construction was $50 million in 2019, a $19 million decrease compared to 2018, with an Adjusted EBIT margin of 1.8% (2.3% in 2018). Positive price realization was more than offset by unfavorable volume and mix in North America and rest of world markets, including negative industrial absorption, and higher product costs primarily related to increased raw material costs and tariffs, and costs associated with the product quality excellence initiative. 

Adjusted EBIT of Commercial and Specialty Vehicles was $188 million in 2019 ($285 million in 2018) and includes a $50 million gain realized in the third quarter from granting to Nikola Corporation access to certain Iveco technology as part of the $150 million in-kind contribution as consideration for the initial equity interest in Nikola. Adjusted EBIT was negatively impacted by higher product costs, foreign exchange transaction impacts, and the remeasurement of certain provisions completed in the fourth quarter, partially offset by favorable volume and mix, positive price realization and a reduction in short-term incentive compensation expense.

 Adjusted EBIT of Powertrain was $362 million in 2019, a $23 million decrease compared to $385 million in 2018 due to unfavorable volume and mix and higher product development investment geared towards the “Transform2Win” strategy initiatives, partially offset by positive price realization and product cost efficiencies. Adjusted EBIT margin was 8.8% in 2019, up 40 bps compared to 2018.

The following table is the reconciliation of Net income to Adjusted EBIT (non-GAAP measure).

2020 Outlook (US GAAP)⁽¹⁾

While CNH Industrial continues to act prudently as a result of prevailing market uncertainties, CNH industrial steps up its efforts on performance and cost initiatives to drive profitability, while continuing its strategic investments in digitalization, automation and alternative propulsion.

In light of the aforementioned industry headwinds and the Company’s initiatives planned for 2020, CNH Industrial is issuing the following 2020 guidance: 

• Net sales of Industrial Activities flat to slightly down to prior year in constant currency.
• Adjusted diluted EPS⁽²⁾ expected between $0.78 to $0.86 per share.
• Free cash flow of Industrial Activities expected between $400 million and $600 million.

Finally, CNH Industrial is fully on track with the separation of it On-Highway and Off-Highway businesses with the target to complete the spin-off in January 2021, supported by specialist financial and business advisors.

1. 2020 guidance does not include any impacts deriving from the gain resulting from the modification of the healthcare plan in the U.S. previously mentioned, as this gain has been considered non-recurring and therefore treated as an adjusting item for the purpose of the adjusted diluted EPS calculation. In addition, 2020 guidance does not include any impacts deriving from possible further repurchases of CNH Industrial’s shares under the plan authorized by the shareholders on 12 April 2019.
2. Outlook is not provided on diluted EPS, the most comparable GAAP financial measure of this non-GAAP financial measure, as the income or expense excluded from the calculation of adjusted diluted EPS and instead included in the calculation of diluted EPS are, by definition, not predictable and uncertain.