Following a strong fourth quarter with revenue up 26.7% over the previous year it was a welcome return to solid sales following a shocker the previous year
With full-year 2022 earnings tallied it was left to CNH Industrial to reveal how the company made sales and other revenue worth US$23.6 billion for the three group divisions, up 20.8% year-over-year.
The agriculture sector was once again the star performer with sales at a 10-year record high and worth US$18 billion for the year, up 22% year-over-year.
See how this result compares with Quarter 1 sales and profit for John Deere on this link, and also for Kubota who has just released its full-year earnings on this link.
CNH Industrial Ag sales made up 76% of total revenue for 2022 and were helped along with CNHI’s 4Q 2022 ag sales, up 29.4% to US$5.37 billion, which the company attributed to increased retail pricing and higher sales volumes across the board.
CNH Industrial, Chief Executive Officer, Scott W. Wine was quick to point out the CNH Industrial team delivered a strong fourth quarter contributing to record full-year revenue and income.
sharp execution and improving supply chain management generated US$1.6B of full-year industrial free cash flow.
Scott W. Wine added, “We are pleased to have resolved the UAW strike and are eager to continue delivering increased value to our dealers and customers. We also announced our intention to move to a single listing in New York, with plans to exit the Milan exchange as expeditiously as possible.
“Our precision and autonomy offerings were on full display at our Tech Days, and further innovations and integration with Raven will drive the success of our farm and construction customers.
“We see continuing strength in most end markets, and with better-performing supply chains and moderating inflation we are confident we will build on our robust foundation,” Scott W. Wine concluded.
In addition to the Ag Division, net sales of Industrial Activities brought in US$6,352 million, up 27.2% mainly due to favourable price realisation and higher sales volumes, despite more than 4% adverse currency conversion impacts.
Adjusted EBIT of Industrial Activities of US$680 million (US$378 million in Q4 2021), with both segments up year over year. For Agriculture, the adjusted EBIT margin was 13.1% and for Construction at 3.5%.
The gross profit margin of Industrial Activities of 21.6%, (19.0% in Q4 2021) with improvement in Agriculture and Construction despite continued cost pressures.
Agriculture division in detail
In quarter 4 of 2022, in North America industry volume was flat year over year for the fourth quarter 2022 for tractors over 104kW (140hp) and was down 14% for tractors under 104kW (140hp). Combine sales were up 44%.
In Europe, the Middle East and Africa (EMEA), tractor and combine demand was down 7% and up 8%, respectively, of which Europe tractor and combine demand was down 1% and up 36%, respectively.
South American tractor demand was down 8% and combine demand was up 6%.
Asia Pacific tractor demand was up 18% and combine demand was up 296%.
Overall, Agriculture net sales were up 29%, due to favourable price realisation, higher sales volumes and better product mix, mostly driven by North America, South America and Europe regions partially offset by the negative impact of foreign exchange rates.
Gross profit margin was at 23.1%, with Gross Profit US$394 million higher than in Q4 2021, mainly due to favourable price realisation in the North America, South America and Europe regions more than offsetting higher manufacturing and purchasing costs across all regions.
Adjusted EBIT was US$701 million (US $414 million in Q4 2021), with an Adjusted EBIT margin of 13.1%. The US$287 million, 3.1% increase from Q4 2021 was driven by favourable price realisation and better product mix, partially offset by higher manufacturing and purchasing costs, and increased SG&A and R&D spend.
Order book in Agriculture was down 23% year over year for tractors worldwide with all regions down except the Asia Pacific region.
Order books for combines were down 20%, with declines in all regions except the Asia Pacific region. At above 2.2 times the pre-pandemic levels, order books remain strong in all regions.
Construction in more detail
In Q4 2022, global industry volume for construction equipment decreased in both Heavy and Light sub-segments year over year in the fourth quarter, both down 2%.
Aggregated demand increased by 1% in EMEA, decreased by 6% in North America, decreased by 9% in South America and decreased by 1% for Asia Pacific, particularly in China.
Construction net sales were up 17%, driven by positive sales volume, favourable price realisation, and contribution from the Sampierana business, partially offset by the negative impact of foreign exchange rates.
The gross profit margin was 13.3%, up 1.0% compared to Q4 2021, mainly due to favourable price realization and higher volumes in North America, South America, and Europe, contributions from the Sampierana business, partially offset by higher raw material costs.
Adjusted EBIT increased US$14 million due to favourable volume and mix and positive price realization, partially offset by higher raw material costs and increased SG&A spend. Adjusted EBIT margin at 3.5%.
The construction order book was down 19% year over year in the Heavy sub-segment and down 10% in the Light sub-segment from elevated levels at the end of 2021. Dealer inventories remain low compared to past performance.
Financial Services at a glance
In Q4 2022, revenues were up 21% due to favourable volumes in all regions, and higher base rates across all regions, mainly in South America, partially offset by lower used equipment sales.
Net income decreased US$15 million to US$75 million, primarily due to margin compression in North America, increased labour costs, and higher specific reserves, primarily in China related to Construction customers and dealers, partially offset by favourable volumes in all regions, and higher recoveries on used equipment sales.
The managed portfolio (including unconsolidated joint ventures) was US$23.8 billion as of December 31, 2022 (of which retail was 67% and wholesale was 33%), up US$3.6 billion compared to December 31, 2021 (up US$4.0 billion on a constant currency basis).
The receivable balance greater than 30 days past due as a percentage of receivables was 1.3% (1.2% as of December 31, 2021).
During the quarter, CNH Industrial Capital North America closed on its previously announced purchase of Citibank N.A. and Citi Cards Canada Inc.’s portfolio of revolving charge account (“RCA”) receivables underlying a private-label RCA product offered through CNH Industrial North America dealers.
2023 outlook forecast
CNH Industrial is providing the following 2023 outlook for its Industrial Activities.
It expects net sales to be up between 6 and 10% year on year including currency translation effects. With SG&A up no more than 5% when compared with 2022.
Free Cash Flow of Industrial Activities is forecast at between US$1.3bn and US$1.5bn, with R&D expenses and capital expenditures at around US$1.6bn.
