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CNH lifts earnings guidance, as Latin America sales soar

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CNH Industrial raised its earnings guidance, citing better-than-expected market conditions, including a surge in Latin American sales – which contrasts with the downturn in the region's agrichemicals market.

The group, the maker of Case and New Holland machinery, said that sales for 2017 would come in at "approximately" $24bn, compared with a previous forecast of $23bn-24bn.

Earnings per share for the full year will come in at about $0.41, compared with previous guidance of $0.39-0.41.

CNH cited for the revision market conditions which, "across our major segments have been better than originally expected" so far this year, allowing operating profits to rise 7.1% to $523m, on sales up 2.9% at $6.95bn.

Latin America upgrade

In agricultural equipment, by far CNH's biggest earner, sales gained 3.0% to $2.81bn, "as a result of a strong rebound in demand in Latin America" – where group revenues soared 29%.

Indeed, underlining "strengthening agricultural equipment demand" in the region, the company raised to 15-20%, from about 15%, its estimate for growth in industry tractor sales in Latin America this year.

The upgrade contrasts with the troubles facing agrichemicals groups in the region, as highlighted separately on Wednesday by Syngenta, and by a profit warning by Bayer late last month.

Used machinery wins out

However, CNH recorded a 4.4% drop in sales in the Nafta countries – Canada, Mexico and the US – citing "continued inventory destocking efforts in high horsepower tractors", with dealers' focusing on working down stocks, including of used machinery.

Second-hand equipment is often particularly attractive to farmers at time of weak agricultural commodity prices and depressed profitability.

Indeed, the ratio of sales of used equipment to new machinery has in the US hit 3.4 times so far this year, the highest in more than a decade, the group said.

CNH also flagged "weakened demand in hay and forage product lines", and "persisting end-market weakness in France", where tax changes have added to the persistent hangover from the country's weak 2016 grains harvest.

Market reaction

The results received a mixed response from investors, whose initial response was to mark CNH Industrial shares down 2%, although the stock recovered to close at E9.92 in Milan, a gain of 0.6%.

A quarterly earnings result of $0.16 per share, while up significantly from the $0.03-per-share figure a year before, were in line with market expectations.

And analysts were already expecting the group to achieve a full-year result of $0.44 per share, on sales of $25.8bn, according to Reuters data.

By Mike Verdin

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