CNH Industrial improves guidance after strong Q2, shares up 10 pct

Photo: CNH Industrial

Milan | Reuters (July 26, 2018) – Truck and tractor maker CNH Industrial raised its full-year guidance on Tuesday after better-than-expected quarterly earnings, sparking a more than 10 percent rally in its shares.

Milan-listed shares closed 10.6 percent higher at 9.93 euros, making it the best performer on the city’s blue-chip index, which ended the session up 1.4 percent.

The company, which makes most of its profits from farming machinery, Iveco commercial vehicles, construction equipment and powertrains, said it had seen improvements across all business segments in the last quarter, and that the higher guidance was still cautious.

Acting Chief Executive Derek Neilson told analysts on a conference call that “the machine is running well”. “Essentially the trade war is what’s driving the prudent approach we’ve taken on the second half of the year,” he said.

CNH Industrial has been through some management upheaval in recent months, first due to the resignation of longtime Chief Executive Richard Tobin in March and then the unexpected death of Chairman Sergio Marchionne announced on Wednesday.

Neilson, who holds the CEO role on an interim basis, said a new CEO would be announced in the near future.

The company on Saturday named Suzanne Heywood as its new chairman to replace Marchionne, who fell seriously ill and later died after suffering complications following surgery.

Asked whether the changes at the helm would delay decisions on any potential strategic moves, Neilson said his team was “constantly looking at opportunities how to grow the business organically and inorganically”.

He said the yet-to-be named CEO and the new chairwoman needed to be given time to acquaint themselves with the business before making any decisions, “but I don’t think there’s going to be a material delay of anything if we did consider this in the future”.

Former CEO Tobin said earlier this year he was open to considering spinning off some of the company’s units once their balance sheets were sound.

Until then, the company will focus on actions to improve its credit rating and look for options to extend the duration of its debt, Chief Financial Officer Massimiliano Chiara added.

The company, created from the merger of Fiat Industrial and its U.S. unit CNH, said adjusted operating profit for its industrial activities in April-June rose 44 percent to $571 million, while net industrial sales increased 16 percent to $7.58 billion.

CNH said it expects to report a 2018 adjusted diluted EPS of between $0.67 and $0.71, up from $0.65-0.67 forecast previously, and decrease its net industrial debt to between $0.7-0.9 billion, compared with a previous guidance of $0.8-1.0 billion.

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