CNH to Focus on Ag; Construction Business to Become "Fairly Independent"
The company's construction business – under Case and New Holland brands – will be run in a distinct, more autonomous way, new...
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CNH Industrial’s new CEO started his first earnings call by announcing the company will soon designate agriculture as its “core business.” This means the company’s construction business will now be managed in a new, more autonomous way.
CEO Gerrit Marx said the company – which owns Case and New Holland brands – plans to treat its construction business as a “distinct and fairly independent operation for its own agility and optionality to seek opportunities in its industry.”
“We will obviously keep nurturing the synergies with construction, both downstream and upstream, but we need to recognize that agriculture is and will remain our home turf,” Marx said.
One aspect of this shift in management style will be to give the company’s agriculture business “improved commercial and brand effectiveness.”
During the Q&A portion of the call, Marx expanded on the coming independence of the construction segment.
“The two businesses – ag and construction – have today already separate manufacturing footprints,” he said. “They have dedicated R&D resources. We have separate dealer networks and even separate sales organizations.”
One New Holland dealer told Equipment World they'd received no communication yet about coming changes to CNH's CE business.
Construction Net Sales Down
CNH Industrial recorded $890 million in second-quarter construction net sales, down 16% year-over-year. This was due to lower volumes in all CNHI’s market regions driven “mainly by lower market demand,” the company said. CNH Industrial CFO Oddone Incisa said during the earnings call this decline was “larger than anticipated and lowered our expectations for the second half.”
However, gross profit margin was 16.5% in the second quarter of the year, up year-over-year in part because of better manufacturing costs. CNHI laid off about 200 employees at its Racine, Wisconsin, plant earlier this year.
Marx said during the earnings call the company had reduced construction equipment manufacturing hours in the quarter by 20% year-over-year
Looking at North America specifically, construction net sales in the quarter totaled $503 million, down 14.3% year-over-year. The largest regional decline in construction revenue was in CNH Industrial’s Europe, Middle East and Africa market, which saw a 26.6% decline to $174 million.
The company is forecasting its construction net sales to be down between 15% and 20% year-over-year in 2024.
Consolidated revenue in the quarter was also down 16% year-over-year to $5.5 billion vs. $6.6 billion in last year’s second quarter.
