CNH, construction equipment--CNH Global Swings To 2Q Net Profit Of $144 Million Article Email Printer

CHICAGO (Dow Jones)--CNH Global N.V. (CNH, NHL.BE) swung to a second-quarter net profit from a year-ago loss as sales of construction machinery rose 44% and margins improved on farm equipment.

CNH, a unit of Italian auto maker Fiat SpA (F.MI, FIATY), whose brands include Case, New Holland, Kobelco and Steyr, reported net profit of $144 million, or 60 cents a share, compared with a loss of $67 million, or 28 cents a share, in the same quarter a last year ago. Sales of equipment rose 10.7% to $3.93 billion.

The results topped Wall Street analysts' expectations of 41 cents a share on revenue of $3.73 billion. Investors responded favorably to the results. CNH's stock was recently up 5.9% at $29.89 a share. Other farm- and construction-equipment companies are trading higher as well, including Deere & Co., (DE) up, 1.9% at $61.89, and Caterpillar Inc. (CAT), up 0.73% at $66.91.

CNH, the world's second-largest farm-equipment manufacturer behind Deere, attributed its improved performance to increased demand for equipment in North and South Americas, offsetting difficult economic conditions in Europe.

"Western Europe continued to be weak for both ag and construction equipment," said Richard Tobin, CNH's chief financial officer, during a conference call Wednesday with stock analysts. "Latin America is still performing strong and the rest of the world markets improved performance."

CNH's construction-equipment sales, which accounted for 20% of the company's total equipment sales in the quarter, rose to $790 million from $547 million a year earlier. Operating profit from construction was $13 million, compared with a loss of $94 million a year earlier when CNH was saddled with high inventories of equipment amid a severe slowdown in global construction activity.

CNH said world-wide industry sales volumes of construction machinery rose 60% in the quarter, with sales in North America increasing 13% and Latin America volumes doubling off a low base a year ago. CNH predicted global sales of construction equipment this year will increase by 25% to 30% from 2009. North American sales are seen rising 5% to 10% with Western Europe flat to up 5% and Latin American sales surging 60% to 65%.

CNH's second-quarter sales of farm machinery climbed 4.5% from a year ago to $3.14 billion. Operating income rose 23% to $644 million, as the farm segment's operating margin improved to 10.1% from 8.5% on better factory productivity and a favorable price mix of products sold in the quarter.

Worldwide industry unit sales of farm machinery fell 4% in the quarter. CNH forecast global sales of farm equipment this year will be flat with 2009. The company predicted tractor sales in Europe will fall 10% to 15% from 2009, while North American tractor sales are seen as flat to up 5%. Latin American tractor sales are expected to climb 20% to 25%.

Illinois-based CNH didn't offer formal sales and profit guidance with its second-quarter results, but noted that it will likely offer 2010 guidance after the third quarter. Analysts polled by Thomson Reuters expect the company to earn $1.31 a share for the year on $13.52 billion in revenue.

 -By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

 Source: The Wall Street Journal