CNH Industrial Capital originations up more than 3%

CNH Industrial Capital originations increased in the second quarter as lower sales at the parent company and higher delinquencies offset higher demand and loan yields.

STATE OF PLAY:  

CNH Industrial Capital’s retail originations grew in the second quarter thanks, in part, to higher demand and loan yields in North America, but they became offset by rising delinquencies, especially in South America, Oddone Incisa, chief financial officer at parent CNH Industrial, said during the company’s Q2 earnings call today. 

“We continue to feel confident in the quality of our credit portfolio globally, and delinquency rates are better than in previous industrial downturns,” he said. 

While CNH Industrial Capital experienced Q2 growth, a decline in agriculture and construction sales led CNH to lower its full-year forecast to a 15% to 20% decline for both segments. Previous projections hovered around a 10% decline, Gerritt Marx, new chief executive of the parent company, said during the earnings call.

BY THE NUMBERS: 

CNH Industrial Capital increased its originations and outstandings in Q2 despite softer industrial sales at CNH Industrial on a year-over-year basis, resulting in lower guidance for agriculture sales and resulting in projected declines in construction sales persisting, according to CNH Industrial’s earnings presentation today.

In the Q2 earnings presentation, CNH Industrial Capital reported: 

• Originations of $2.9 billion, up 3.6% YoY; 

• A managed portfolio of $28.5 billion, up 9.6% YoY; 

• Net income of $91 million, down 3.2% YoY; and 

• Delinquencies more than 30 days past due rose 80 basis points (bps) quarter over quarter and 70 bps YoY to 2.5%. 

Sales figures included:  

• Global industrial sales of $4.8 billion, down 19.3% YoY; 

• Global agriculture sales of $3.9 billion, down 20% YoY; and 

• Global construction sales of $890 million, down 16.4% YoY. 

THE BOTTOM LINE:  

CNH Industrial plans to reduce global agriculture dealer inventory by more than $1 billion by yearend, in conjunction with a 25% production cut in its agriculture segment and a 20% production cut in its construction segment, Marx said. 

“On the construction side, most notably, that is because of the weakness in the U.S. residential sector, while the base infrastructure construction is obviously continuing to go reasonably well,” he said. “We have taken them down slightly earlier than the others, and we keep traveling on a very careful level of production there to continue lowering our dealer inventory globally.” 

The company still sees “about $1 billion-plus” in agriculture segment dealer inventory to be reduced ahead of 2025, Marx said.

CNH also announced the formation of a Global Leadership Team designed to improve the company’s global operations in agriculture and construction, according to a July 29 company release. Marx discussed the team during the earnings call.

“While there’s a lot going on at CNH right now, we will not take our focus off delivering results in this challenging market environment,” he said. “Our global leadership team was announced on Monday this week, builds on way more than 100 years of combined experience in our industry and is empowered to carry out faster and more effective delivery of the strategic priorities for profitable long-term growth with a simplified matrix structure and clearer accountabilities.”

Shares of CNH Industrial N.V. (NYSE: CNH) dropped 4.72% or $0.48 to $10.65 as of market close today. CNH Industrial has a market capitalization of $12.79 billion.  

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