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CNH shares fall back, after it lowers sales hopes again

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Shares in CNH Industrial retreated from a 13-month closing high after the maker of Case and New Holland machines, noting a “further” market deterioration, cut its sales forecast for a second time.

 

The UK-headquartered, but Milan-listed, group reduced to $26.5bn-27bn its forecast for full-year sales in its manufacturing operations, which also include Iveco trucks and bus maker Heuliez Bus.

 

The sales guidance had previously been cut, in August, to $27bn-27.5bn, from $28bn.

 

“Industry conditions in the main agricultural markets have further deteriorated,” CNH said, citing “market uncertainties and negative farmers’ sentiment”, which had been undermined in particular by crop setbacks.

 

While CNH Industrial stood by a full-year earnings-per-share target of $0.84-0.88, its stock, which ended the last session with its highest finish since October 2018, stood down 4.4% at E9.96 in late deals.

 

China-US hopes

The group said that there was the potential yet for a late-2019 recovery in North American market, given growing optimism over a China-US trade deal.

 

“Recent developments in US-China trade negotiations and the related potential implications for commodity prices could have a positive impact on sentiment and, accordingly, equipment purchases in the US and Canada.”

 

Nonetheless, it revised to a decline of 5%, the bottom end of the previous guidance range, its forecast for the North American market for large tractors this year.

 

‘Slow start’

In South America, where CNH had forecast a flat market over 2019, it downgraded that estimate to a decline of 10%, noting shortfalls in a government support programme, as mentioned too by rival Agco last week.

 

While saying it “continues to have a positive view on demand in South America,” CNH said that “as yet… we have not seen the increased penetration of Brazil into the grains export market translate into incremental equipment purchases.

 

This was “likely as a result of the slow start of the new subsidy programme into the 2019-20 harvesting season”.

 

Market forecast revisions

CNH lowered too its forecast for tractor sales in more minor markets, now seen shrinking by 10%, double the decline previously expected.

 

While the estimate for the European tractor market this year was held at growth of up to 5%, the forecast for the global market was downgraded to a decline of 5-10%, compared with a previous expectation of at worst 5% shrinkage.

 

Forecasts for combine sales were also lowered in all markets except the European one, with global shrinkage of up to 5% now expected, compared with a previous estimate of a flat performance.

 

’Volume deceleration’

 

For the July-to-September quarter, CNH reported a 22% drop to $152m in operating profits in agriculture, on sales down 7.2% at $2.45bn.

 

“Industry volume deceleration coupled with an unfavourable product mix drove sales down, primarily in North America and the rest of world geographies,” the group said.

 

It also flagged “lower fixed-cost absorption” as production curbs undermined economies of scale, with the group noting too “higher product costs as result of increased raw material and tariffs”.

 

Group earnings were flat at an underlying level at $222m, on revenues down 4.9% at $6.36bn.

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