Agricultural equipment markets will see further, slow, recovery this year despite stagnant farm incomes, CNH Industrial said, forecasting improvement in its own finances too, after a slower-than-expected close to 2017.
The maker of Case and New Holland machinery said that in 2018 “worldwide demand for agricultural equipment is expected to improve”, with all regions seeing a performance “flat to up 5% on average”.
The modest growth will come even as farm incomes “are expected to remain stable, leading to no significant changes in plater acreage”.
And it follows on from a 2017 which saw growth in industry sales of farm equipment in Asia Pacific, Europe and Latin America, although with volumes flat the fourth key region, North America, where a rise in row crop machinery was “offset by lower livestock sector volumes”.
CNH Industrial forecast its sales from industrial activities growth to $27bn-28bn for 2018, up from $26.17m which it reported for last year.
Analysts have forecast the group’s overall sales this year at $28.03bn, up from the $27.36bn it reported for 2017.
On underlying earnings, CNH forecast its 2018 result at $0.63-0.67 per share - up from the $0.48 reported for last year, and marginally ahead too of the $0.62-per-share result that analysts have forecast.
However, CNH Industrial shares stood 1.9% lower nonetheless at E11.97 in afternoon deals in Milan, after the 2017 result fell short of market expectations.
The underlying earnings per share of $0.14 that the group reported for the October-to-December period compared with a consensus expectation of a $0.17-per-share figure.
Revenues vs profits
For the October-to-December period, the group reported a 15.8% rise to $8.10bn in revenues, helped by a 14.5% jump to $3.24bn in takings at its agricultural equipment division, its biggest earner.
In the key European division, sales growth was “primarily driven by higher combine sales in preparation of the 2018 season and positive price realisation”.
Sales grew in Asia Pacific and Latin American markets too, but were “flat” in North America, where CNH has been feeling the impact of destocking by major dealers, such as Titan Machinery.
Operating profits were flat at $279m despite the revenue rise, with CNH reporting pressure on margins from a cocktail of factors.
"Favourable volume, net price realisation and lower warranty costs were partially offset by an unfavourable product mix, higher manufacturing costs in EMEA [Europe, Middle East and Africa] as a result of the transition to new regulatory requirements and an overall increase in research and development spending," CNH said.