RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Ag machinery markets to shrink again in 2016

Twitter Linkedin eCard

CNH Industrial forecast a further year of contraction for the agricultural equipment market - but at a decelerating pace - as the maker of Case and New Holland machinery unveiled a bigger-than-expected recovery in profits.

The group, formed from the merger of ag machinery maker CNH Global and truck manufacturer Fiat Industrial, forecast that the North American tractor market would shrink by a further 5% this year, with industry combine sales to slump by 15-20%.

Declines were expected in many other major markets to, with Latin America's tractor sales expected to drop by 15%, and European combine volumes by up to 5%.

However, these declines were, broadly, less severe than those noted in 2015, when the world tractor market shrank by 8%, in volume terms, while combine sales plunged by 9%.

For instance, the decline in Latin American combine sales was seen slowing to 0-5%, from 39% last year, with the European tractor market expected to flatten out, after a 7% decline in 2015.

'Structural cost reductions'

The forecasts came as the group unveiled a bigger-than-expected rise in operating profits for industrial activities for the October-to-December period – by 50% to $563m, ahead of forecasts of a $455m result – with the improvement driven by the ag division.

Tractor market prospects for 2016 and (2015 figure)

Europe, Middle East, Africa: Flat, (-7%)

Asia Pacific: Flat to -5%, (-9%)

Nafta: -5%, (-2%)

Latin America: -15%, (-27%)

Source: CNH. Data for total industry

However, divisional operating profit, at $348m, jumped 44%, as the benefits fed through of cutbacks which have, for instance, seen the group slash production of some lines, with combine output down 35% in the quarter, compared with the same period a year before.

CNH said that its operating margin, which improved by 4.6 points to 11.7%, was the "best agricultural equipment margin for the quarter" among major machinery makers.

"The increase was due to [higher] net price realisation, structural cost reductions and favourable material costs," the group said, flagging a drop of 27% year on year in admin expenses, and a drop of 26% in dealer inventories too, as the impact of weaker production fed through.

Profits to drop?

The immediate reaction to the result was to send CNH shares soaring 8% in Milan, although the stock eased back to close at E5.745, a gain of 3.3% on the day.

Combine market prospects for 2016 and (2015 figure)

Asia Pacific: Flat to -5%, (-4%)

Europe, Middle East, Africa: Flat to -5%, (-7%)

Latin America: Flat to -5%, (-39%)

Nafta: -15-20%, (-28%)

Source: CNH. Data for total industry

Operating margin from industrial activities as, at 5.2-5.8%, seen at best matching last year's result - and implying a drop in profits.

The group also unveiled a dividend of E0.13 per share, and unveiled a share buyback of $300m.

By Mike Verdin

Twitter Linkedin eCard
Related Stories

World phosphate, potash shipments to grow in 2018, helped by Chinese needs

Mosaic forecasts further demand expansion, as it heralds a "transformational year" for its own fortunes, after a 2017 marred by a one-time tax charge

Deere lifts sales hopes - even as it unveils biggest loss in 25 years

The maker of John Deere tractors flags "strengthening" market conditions, but swallows a huge writedown prompted by US tax retorms

Plant Impact agrees takeover by Croda, after failure of Bayer contract

The crop enhancement group, floored by the failure of a supply deal with Bayer, agrees a takeover by a maker of chemicals from anti-wrinkle creams to floor coatings

Cautions mount over cost to US agriculture of trucking safety clampdown

US officials reference tightened trucking rules in a cotton export forecast downgrade, while Tyson Foods forecasts an extra $200m in costs
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069