CNH Industrial N.V. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet figures are as of March 31, 2024, compared with December 31, 2023. The interim financial statements are unaudited. CNH describes itself as a global agricultural and construction equipment manufacturer with a Financial Services business.
Financial performance
| Metric | Q1 2024 | Prior comparable / change |
|---|---|---|
| Total revenue | $4.818 billion | $5.342 billion; down 9.8% (10.4% constant currency) |
| Industrial net sales | $4.131 billion | $4.776 billion; down 13.5% (14.0% constant currency) |
| Net income attributable to CNH | $401 million | $482 million |
| Diluted EPS | $0.31 | $0.35 |
| Industrial Activities Adjusted EBIT | $405 million; 9.8% margin | $555 million; 11.6% margin |
| Financial Services revenue / net income | $685 million / $118 million | $549 million / $78 million |
| Operating cash flow | $(894) million | $(701) million |
| Investing cash flow | $(419) million | $(749) million |
| Cash and restricted cash | $3.959 billion | $5.045 billion at year-end 2023 |
| Total debt | $27.780 billion | $27.326 billion at year-end 2023 |
| Available liquidity, as defined by CNH | $9.155 billion | $11.224 billion at year-end 2023 |
Cost of goods sold was 77.3% of Industrial Activities net sales, compared with 75.6% a year earlier. Cash used in operations primarily reflected a $1.367 billion working-capital outflow. Capital expenditures excluding operating-lease assets were $96 million. CNH reported consolidated net debt of $23.720 billion, versus $22.088 billion at December 31, 2023; Industrial Activities moved from $16 million net cash to $1.782 billion net debt. The company attributes the increase, excluding positive foreign-exchange effects, mainly to Industrial Activities free-cash-flow absorption, Financial Services portfolio growth, and share repurchases.
Material changes and business drivers
- Agriculture revenue fell 14.1% to $3.373 billion and Adjusted EBIT declined to $421 million from $570 million. Lower demand and volumes across regions and dealer inventory management weighed on sales; favorable pricing and improved purchasing and manufacturing costs provided partial offsets.
- Construction revenue declined 10.7% to $758 million, while Adjusted EBIT increased to $51 million from $44 million. Lower volumes were partly offset by improved product costs and lower SG&A.
- Financial Services revenue grew 24.8% and net income rose by $40 million. Management cited favorable volumes and yields, South American margin improvement, and a favorable tax rate, partly offset by higher credit-risk costs.
- Interest expense increased to $394 million from $272 million, primarily due to higher rates and outstanding Financial Services debt. Restructuring expense was $31 million, compared with $1 million.
- The effective tax rate was 19.2%, versus 27.6%; CNH attributed the lower rate to discrete items in 2024 compared with rate-increasing discrete items in 2023.
Liquidity, outlook, risks and unusual items
- CNH stated that cash, access to credit facilities, and expected operating cash flows should be adequate to fund known cash needs. Available liquidity includes cash, restricted cash, undrawn unsecured committed facilities, and net financial receivables from Iveco Group.
- After quarter-end, CNH entered into a new unsecured, committed revolving credit facility of €3.25 billion, maturing April 19, 2029, with two possible one-year extensions. The facility may be increased by up to €500 million.
- No specific revenue, earnings, or other financial guidance for 2024 is provided in the supplied filing text. Management describes weaker industry demand, lower commodity prices, higher interest rates, inflation, geopolitical events, supply-chain disruption, and policy changes as business uncertainties.
- CNH expects up to $200 million in aggregate restructuring charges for 2023 and 2024; $78 million had been incurred through March 31, 2024. The quarter included $31 million of restructuring expense, primarily employee separation costs.
- The company disclosed an unresolved material weakness in IT general controls involving user access and segregation of duties across multiple ERP applications. It concluded disclosure controls were not effective at March 31, 2024. No resulting financial-statement misstatement was identified; remediation and testing remain in progress.
- Legal and environmental contingencies include a range of product, dealer, supplier, emissions, competition, and environmental matters. CNH said the reasonably possible additional losses on unresolved legal matters, beyond accrued amounts, would not materially affect the consolidated financial statements. Environmental reserves were approximately $19 million.
- CNH repurchased 48.6 million shares during the quarter for approximately $581 million. A $1 billion buyback program expired March 1, 2024, and a previously authorized $500 million program commenced.
Investor verification priorities
- Track agricultural and construction demand, dealer inventories, and whether lower volumes continue to pressure Industrial Activities margins.
- Monitor working-capital needs, cash generation, net debt, and the composition and availability of the reported $9.155 billion of available liquidity.
- Assess Financial Services credit quality, especially South American delinquencies, provisions, and portfolio growth; receivables more than 30 days past due were 1.7%, versus 1.4% a year earlier.
- Follow progress and independent testing of the IT-control remediation plan, given the disclosed material weakness and ineffective disclosure controls.
- Verify restructuring charges against the stated program ceiling, and evaluate buyback spending alongside liquidity and debt requirements.